Sterling not only lost ground against USD but also against EUR over the past few days. In the opinion of economists at Commerzbank, there are indeed some quite good reasons for GBP to ease.

Dark clouds on the horizon

“It is difficult to ignore the impression that if the economy were to weaken considerably it would take the economy into consideration with its monetary policy decisions if push came to shove and would not fight inflation in the determined way that might become necessary. This is likely to remain a negative factor for Sterling, in particular against USD, as the US central bank is acting more decisively against inflation.”

“On Monday we will find out who is going to be the leader of the Conservative Party and thus Prime Minister going forward. Liz Truss is leading the polls. She is not exactly the favourite candidate of the financial markets.”

“Should we see a surprise on Monday in the end, with Rishi Sunak being announced as the winner Sterling might benefit in an initial reaction. However, fundamentally the outlook for Sterling remains dampened.”