The U.K.’s Currency Gets Pounded

The U.K. economy is struggling as Europe deals with an energy and economic crisis. As a result, its currency has fallen heavily against the U.S. Dollar like its peers, the Euro, Yen, and others. 📉

Yet despite record-high inflation and a crashing currency, today, the government outlined plans to cut taxes and boost spending to stimulate its economy. The news sent the GBP/USD pair to levels not seen since 1985 and U.K. government bond yields soaring.

The policy decisions are a clear case of the country’s fiscal and monetary efforts being at odds. The Bank of England is raising interest rates to slow the economy and contain inflation. And now, the government is making efforts to increase economic growth. 🤦

Meanwhile, the tools both sides are using affect demand and don’t solve the supply-side issues that are pushing prices up throughout the country.

Market participants say these actions have caused U.K. officials to lose whatever credibility they had left in the financial markets. And given the overall mess its economy and energy markets are in, many expect the country to be in for a very cold winter… 🥶

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Global News You Can Use

A lot happened today, so let’s try to recap all the headlines. 📰

First off, global tensions continue to rise as Russia claims the U.K. navy blew up the Nord Stream pipeline, which furthered its own energy crisis. However, London denies its involvement, and Russia did not provide any concrete evidence for its claim that a leading NATO member sabotaged its infrastructure.

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A Boatload Of International News

There was a lot of international news today and over the weekend, so let’s quickly recap. 📰

First, Hong Kong’s economy shrank 4.5% YoY in Q3, which is a scary picture for China and APAC-region economies. The region continues to struggle with political and economic instability but blamed weak external demand and cross-boundary land cargo operations disruptions for the slowdown. It’s also dealing with offshoots from China’s property market, which remains in crisis.

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A U.S. Housing Update

It’s no secret that the housing market is in bad shape. Higher interest rates and record-high prices have crushed the demand side of the equation, and supply remains tight.

With that said, we got some additional data today so let’s take a look… 👀

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The Crude Oil Divergence Continues

Crude oil remains under pressure as China’s lockdowns weigh on demand and fears of a global recession rise.

With that said, one thing that traders are keeping an eye on into year-end is the divergence between crude oil’s price and energy stock performance. The two had traded in tandem from January through July when they began to go their separate ways. 🧭

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