Sterling reaches record lows and Truss is to announce energy crisis plan

Liz Truss is to present plans to tackle the squeeze on Britain’s gas supplies following obstruction from Russia. Truss is expected to announce that the UK’s energy bills will be frozen at roughly £2,500 a year for the next 2 years (until 2024) as part of her support package.

Charities and thinktanks, including the Institute for Fiscal Studies, said that the government’s plans to cap energy bills are “poorly targeted” and “fail to protect low-income families” but Truss says the government will “take action immediately” to aid “people and businesses with bills”, and also “take decisive action to tackle the root cause” of the energy supply crisis.

Today is a big data day for eurozone market watchers as the European Central Bank is to announce its interest rate decision at 1:15 this afternoon. The ECB is expected to raise its interest rates by 75 bps to 1.25%. If they do, this will raise eurozone borrowing prices to the highest they have been in 11 years.

Lots of key data from the US today with Initial Jobless Claims being announced at lunchtime. In the last data, markets saw the number of Americans filing new unemployment benefit claims fall from a downwardly revised 237k, to 232k. Today, markets are expecting those numbers to decrease gently by 2k to 230k.

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GBP: sterling still at a low against both currencies

This morning sterling continues to weaken against the euro after hitting its lowest GBP/EUR rate since May 2021 yesterday, falling by 1%. There were various reasons for the pound’s fall, including slowing UK housing markets and developments in the energy crisis.

On the energy crisis matter, Liz Truss is to present her plans to tackle the squeeze on Britain’s gas supplies following obstruction from Russia. Truss is expected to announce that the UK’s energy bills will be frozen at roughly £2,500 a year for the next 2 years (until 2024) as part of her support package.

Charities and thinktanks, including the Institute for Fiscal Studies, said that the government’s plans to cap energy bills are “poorly targeted” and “fail to protect low-income families” but Truss says the government will “take action immediately” to aid “people and businesses with bills” and also “take decisive action to tackle the root cause” of the energy supply crisis.

Today and tomorrow are quiet days for UK data releases, however lots of key data will be announced at the start of next week.

GBP/USD over the past year 

EUR: euro weakens against dollar ahead of ECB’s interest rate decision

Today is a big data day for eurozone market watchers as the European Central Bank is to announce its interest rate decision at 1:15 this afternoon. The ECB is expected to raise its interest rates by 75 bps to 1.25%. if they do, this will raise eurozone borrowing prices to the highest they have been in 11 years. The rate hike is part of the Bank’s aim to control inflation, which is predicted to reach double-digit figures in the coming months

Following the interest rate announcement, the ECB will hold a press conference today at 1:45pm and the ECB’s president Christine Lagarde will also speak at 3:15 this afternoon.

USD: dollar grows stronger against both currencies

Lots of key data from the US today, one of those releases being Initial Jobless Claims at lunchtime. Markets will be keeping a close eye on today’s figures as initial jobless claims measure  new and emerging unemployment in the US and have a large impact in financial markets. In the last data, markets saw the number of Americans filing new unemployment benefit claims fall from a downwardly revised 237k to 232k. Today, markets are expecting those numbers to decrease gently by 2k to 230k, pointing to tight labour conditions even in an economic growth slowdown.

After multiple speeches from the Federal Reserve yesterday, today markets can expect one key speech from the Fed’s Chair, Jerome Powell at 2:10 this afternoon.

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