Currency traders are getting anxious about the impending winter because they are concerned about the amount of government expenditure that will be required to help businesses and consumers get through it, as well as the effect that this may have on debts and the interest rate payments on debts.
The price of the euro dropped below 99 cents, reaching $0.988, while the price of the pound reached $1.14; this was the price it had not seen since March 23, 2020, when Boris Johnson originally advised the nation to stay indoors.
The value of the euro has fallen to its lowest point since 2022.
Even though market participants are looking forward to an interest rate decision from the European Central Bank this week amid calls for a larger-than-usual increase, Chris Turner, global head of markets at Dutch bank ING, stated that it is "not obvious where the next support level exists" for the shared currency. This is despite the fact that traders are looking ahead to the announcement.
"We believe that a 0.75% boost at the ECB's meeting on Thursday would be a step too far for the central bank, and we are looking for a 0.50% hike instead. This will not be beneficial to the euro," he went on to say.
As a result of Russia's decision to permanently shut down its Nord Stream gas pipeline, the markets experienced a nervous reaction.
A widespread fear of taking risks led to a decline in stock prices throughout all of Europe's major markets. The FTSE 100 experienced a decline of 54 points, or 0.7%, to finish at 7228.10.
Although the condition of the stock and currency markets may not be at the top of the incoming Prime Minister's to-do list, the fact that they do so makes it more difficult for her to fund her plans to rescue the energy industry.
According to Craig Erlam, a market analyst at Oanda, "the job that lies ahead of them is immense," as the country is facing the prospect of a protracted recession and eye-watering inflation. To put it bluntly, easing one while not making the other worse would be the first responsibility of whoever is elected Prime Minister, and doing so won't be an easy task by any stretch of the imagination. The current state of the pound is a clear indication of the widespread pessimism that pervades the United Kingdom.
Inflation will reach 22%, according to a forecast from Goldman Sachs from last week. Particularly small businesses have expressed concern that they will not be able to keep up, which might put the security of millions of jobs at jeopardy.
The United Kingdom's Clear Treasury stated in a note that "Sterling has had a difficult month, incurring large losses when compared to both the dollar and the euro." Given the gloomy projections for the economy as of right now and the generally negative news coming out of the UK, it may be difficult to break this run.
On the first day of the new trading week, wholesale markets in the UK and Europe experienced an increase in gas prices; nevertheless, these prices remained lower than the record levels observed in August.
The price of the most important contract on the continent, Dutch TTF futures, increased by over a third to €280 per megawatt hour, but it was still below the record high of just over €300. The cost of one in the United Kingdom, measured in therms (a unit of heat energy), increased by thirty percent over the course of a single