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The pound's losses continued
Sterling resumed its downward trajectory against the US dollar yesterday, hitting its lowest point since mid-March. It was a choppy day against the euro but with no clear direction.
The clear winner of the day was the US dollar, which made gains of around 1% on most major currencies, including GBP, EUR and AUD.
There was plenty of economic and business news yesterday, starting with house prices from the Nationwide, which showed that house prices fell in every region in the year to September. However, the fall was not quite as bad as the market expected.
It’s not just residential property suffering. The office-rental/proptech company WeWork missed an interest payment of $95 million and there is a risk of filing for bankruptcy. Meanwhile another former tech darling, crypto-currency mogul Sam Bankman-Fried, went on trial in Manhattan for fraud.
There was a mixed global picture for manufacturing PMI. While the mood among manufacturers in just about every country was negative (a reading below 50), some were more negative than others. The USA had 49, Spain 47.7, the UK 44.3, the eurozone as a whole was 43.4 but Europe’s manufacturing powerhouse Germany was languishing at the bottom of the pack on 39.6.
However, the big economic event of the day was continuing rumours that prime minister Rishi Sunak will cancel the northern (Birmingham to Manchester) leg of the high speed rail link HS2.
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GBP: Shop price falls and HS2 dominate news
A bit of a curate’s egg for sterling yesterday: good in parts, if we’re being polite. There were big falls against USD and CNY, but GBP/EUR at least stayed in the green, just.
House price numbers were the highlight of what had seemed like a slow week for data. However, Sunak’s cancelling of the northern leg of HS2 will have given the markets pause for thought.
This morning retail inflation has been shown to be easing. Shop prices rose at 6.2% in the year to last month – their lowest for a year – according to the British Retail Consortium, and actually fell between August and September. This is the first monthly fall for two years.
GBP/USD past year
EUR: Poor German manufacturing data sinks euro
The euro lost close to 1% against the US dollar yesterday, but this was dwarfed by losses to the Chinese yuan of 1.8%.
There was some movement against the pound but nothing that led anywhere by the end of the day.
On the data front, at the eurozone level there were no surprises for unemployment (6.4%) or manufacturing PMI (43.4), but Germany’s parlous PMI reading will have contributed to the euro’s underperformance.
Tomorrow there will be the rest of the PMI readings across the eurozone and individual countries, plus retail sales.
USD: DXY at 2023 high
The greenback gained strongly yesterday, by as much as 1% against the pound and Aussie, with the Dollar Index (DXY) reaching its highest level of 2023 at 107.00. However USD/CNY weakened markedly.
This afternoon the US jobs market will be centre stage, with JOLTS job openings. After several months of declines, the markets will be on alert for any signs of recovery for the US economy, as shown by an increase in jobs available.
Tomorrow there will be Services PMI to watch out for. A slightly worsening picture is expected.
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