The pound sterling strengthened on Friday by 0.43 percent to 1.3331, while the euro added 0.29 percent to 1.1253 amid the weakening of the dollar due to concerns over shares of American companies in the AI sector.
The pound sterling showed growth against the dollar on Friday, as did the euro. This happened against the background of pressure on the American currency due to investors' concerns about shares of US companies related to AI.
As of 12:55 Moscow time, the pound rose by 0.43 percent to the level of 1.3331, and the euro added 0.29 percent and reached the mark of 1.1253. The pound is heading for a weekly growth of about 0.7 percent, which could break a seven-week series of declines and lead to the strongest close since September 22.
Head of Global Markets at ING Chris Turner noted that the main event of the week was the recovery of the long end of the US Treasury yield curve, despite inflation data that continues to exceed expectations. According to him, investors are using this as a moderate hedge in case of a correction in the sector related to AI. If there is no further sharp drop in shares of companies in the AI sector and risk assets in general, one should expect consolidation of the dollar near recent highs.
US producer price index data for September, published on Thursday, significantly exceeded market expectations. Forecasts for import price data, which are due out later on Friday, show growth at around 8 percent year-on-year — the maximum since summer 2022. This supported short-term yields and led to a flattening of the US Treasury yield curve by almost 20 basis points over the week.
The rise in the pound was apparently caused by the general weakness of the dollar, and not by internal factors in the UK, since the euro strengthened simultaneously with it. The UK economy in August exceeded forecasts, and growth in the computer programming sector confirmed that AI is contributing to economic growth.
Fiscal prospects remain a risk factor. According to The Guardian, Chancellor of the Exchequer John Healy is preparing to introduce an additional tax on banks as part of the budget on October 28, while the industry expects the surcharge to increase from 3 to 8 percent. According to TUC estimates, this will bring 2.25 billion pounds to the budget annually. TUC General Secretary Paul Nowak stated that the time has come to ensure that banks pay their fair share of taxes. Head of Policy at TheCityUK John Godfrey noted that banks do not want to dine at this restaurant.
ING expects the pair to enter a phase of moderate consolidation, which could lead to movement up to the level of 1.1340-1.1350. Eurozone inflation data for September is expected to confirm growth at 3.8 percent. Markets are already pricing in a further tightening of ECB policy by almost 75 basis points, however, ING forecasts only one additional rate hike.