020 7898 0500
The pound starts this week 1.22% higher against the US dollar
The pound soared to a four-month high against the US dollar on Friday following the Bank of England’s decision to keep interest rates on hold. The GBP/USD rate dropped slightly at the end of Friday’s session but remains 1.22% higher since this time last week.
The UK services PMI rose more than expected to 53.7 in December from 50.9 just a month prior and above expectations of 51. This marks the second consecutive expansion in the British services sector and outperforms contractions seen in European markets.
The British private sector output also rose in December, reaching 51.7 from 50.7 in November and higher than expectations of 50.9. This is believed to be primarily driven by a modern upturn in services output and strong business sentiment.
On the other hand, US factory activity fell to 48.2 in December, the lowest in four months, compared to a previous reading of 49.4 and forecasts of 49.3.
US private sector growth accelerated to a five-month high as it rose to 51.0 in December, from 50.7 in December. This was supported by the sharpest increase in new orders since July.
Federal Reserve Bank of New York president John Williams told CNBC on Friday that the central bank isn’t talking about rate cuts right now and it is premature to be thinking about March 2024 cuts. Expectations for a March cut fell to 65% from 75% following Williams’ comments.
Last week Thames Waters’s parent company saw its credit rating lowered for the second time in six months as Moody’s warned of “materially” increased risks that regulators will block the flow of dividends.
UK house prices are forecast to fall by between 2% and 4% next year, according to Halifax, Britain’s biggest mortgage lender but it expected a part-recovery in the property market as interest rates and mortgage rates ease in 2024.
As we start to wind down for Christmas, remember the markets don’t have time off, so consider calling your account manager to discuss your requirements today at 020 7898 0500
It’s a quiet start to the week for data with euro area inflation tomorrow and on Wednesday, German consumer confidence is forecast to rise and UK investors will recieve the latest inflation rate, more on that below.
Later in the week, US data comes in hot and heavy, with GDP on Thursday and figures for November core PCE price index, durable goods orders, personal income and personal spending on Friday.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Business Account Manager on 020 7898 0500 to get started.
GBP: Inflation forecast to drop to 4.3%
On Wednesday, UK inflation is forecast to fall from 4.6% to 4.3%. Bank of England policymakers are hopeful that their approach to monetary policy is efficient enough to start chipping away at British inflation, which is currently at the lowest level since late 2021.
GBP/USD: the past year
EUR: Inflation to fall on Tuesday
On Tuesday, the inflation rate for the euro area is forecast to decrease from 2.9% to 2.4%. Should this go to plan, it will suggest the European Central Bank’s monetary policy has been somewhat effective.
On Wednesday, investors will receive the latest on the German business climate from the Ifo. The reading is expected to increase to 88.1 from 87.3 in November. Ahead of this data, the EUR/USD has gained some strength this morning, starting the week 1.49% higher.
USD: A week of losses
The US dollar was on the back foot last week following the Federal Reserve’s decision to keep US interest rates unchanged at 5.25%-5.5%. The US dollar is currently 1.22% and 1.49% lower against the pound and euro, respectively, on the week.
For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business account manager on 020 7898 0500 or your Private Client account manager on 020 7898 0541.
