Fiscal developments remain key for sterling. Economists at ING expect the GBP/USD to edge lower toward 1.1000 as downside risks remain high.

Eyes on Truss' reconciliation effort

“UK Prime Minister Liz Truss is set to attempt a reconciliation with the different groups of the Conservative Party. Markets will keep a close eye on whether this will lead Truss to backtrack on some of her other fiscal views (like a windfall tax on energy firms). Barring truly encouraging news on that front, sterling still looks on a slippery slope.” 

“Combining our view for a stronger dollar, we expect cable to easily slide through the 1.1000 support very soon, and to stay on a downward trend into the new year.”

“Tomorrow’s jobs data will be the highlight of the week. We expect the unemployment rate to notch a little higher again, but for now, the Bank of England will keep viewing this through the lens of worker shortages. We expect a 100 bps hike in November.”