Wage increases may not help millions of Brits


Further headlines around wage increases from the Budget will dominate ahead of Chancellor Sunak delivering his Autumn Statement tomorrow afternoon. Rises in the minimum wage, national living wage and the end of the public sector pay freeze are all set to boost earnings for those on lower incomes although this must be balanced out against the rise in national insurance, cuts to Universal Credit and inflation.

We expect to see further pressure on the standard of living from energy costs through the winter with petrol prices hitting a 9 year high yesterday. I know it doesn’t need saying but we have to remember that winter has not even begun in the northern hemisphere yet; demand for heating is only going one way.

Sterling’s ties to these movements have been strong in recent weeks but rising concerns over the Bank of England hiking into an energy and Covid fuelled slowdown won’t help. I would not be surprised if we see some brave opportunists start to sell the pound, looking for a disappointment from the Bank of England meeting next week.


The closer we get to Thursday’s ECB meeting, the more and more we think that the path for the euro is one of weakness.

The central bank will have to upgrade its inflation forecasts but without a subsequent expectation that policy will tighten. Alongside negative interest rates already and central banks in the US, UK, New Zealand and elsewhere that are either ready to raise rates or have done so already, leaves the single currency very close to being just a funding currency for trades.

For now, the euro will likely drift waiting for the announcement on Thursday.


With growth and inflation measures due from the US this week amid a strong pick up in US corporate earnings, its easy to sit here and talk about a higher USD moving forward. We’re a little surprised the USD isn’t higher than where it currently sits although a rebounding equity market and higher commodity prices have taken some of the market attention away from the greenback.

We expect that Thursday’s inflation number will set the hare running for bringing the USD higher as Fed members talk up the prospect of higher interest rates sooner.


Rising equities are happily pushing the yen to fresh lows, with the Japanese currency hitting a 4 year low against the USD.