020 7898 0500
The ECB headquarters in Frankfurt (ilolab / Shutterstock.com)
The pound weakened yesterday as a quiet period for data from the UK continued, but the European Central Bank cut its interest rate for the first time since 2019.
Sterling starts the day fractionally down on all major rivals, while the euro has taken the rate drop in its stride, unmoved against the US or Canadian dollars and slightly up on sterling. However, the euro isn’t out of the woods yet, with the European Parliament elections this weekend.
The ECB’s rate cut was well signposted and had been priced into euro exchange rates for some time, so the markets were listening closely to ECB president Christine Lagarde’s comments afterwards. She certainly struck a cautious tone, pointing out that “domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year.”
The ECB followed the Bank of Canada, which cut rates the day before. Attention now turns to the US Federal Reserve, which will make its interest rate decision on Wednesday. Before that, we have Non-Farm Payrolls this afternoon. It will be the second US jobs report of the week, following JOLTS Job Openings which recorded a weakening jobs market in the US.
Things rev up next week for UK data with unemployment and earnings on Monday. There will also be interest in the weekend’s general election polls, to see whether the Conservative’s combative and contested claims on Labour’s “£2,000” tax plans have cut through to the electorate.
We have just heard that UK house prices fell slightly in May, according to the Halifax. The 0.1% drop in prices still leaves prices 1.5% up over the year.
This morning Labour will be attempting to woo would-be homeowners with a government mortgage guarantee, while the Tories will promise to double the income threshold at which child benefit stops being paid to £120,000.
In business news, the British tech entrepreneur Mike Lynch has been cleared in a fraud trial in California, where he was accused of duping Hewlett-Packard out of billions of dollars. He faced 20 years in prison if found guilty.
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 account manager on 020 3918 7255 to get started.
GBP: Markets look toward jobs and GDP data
We are coming into a period of big data, with unemployment and earnings on Tuesday and GDP on Wednesday. Although two weeks away from the Bank of England’s own interest rate decision, the decision from the US Federal Reserve could well have an impact on GBP.
GBP/USD past year
EUR: Attention turns to EU elections
Later this morning we will hear the eurozone’s GDP result for the first three months of 2024 and also hear more from the ECB’s Christine Lagarde. There isn’t a great deal on the data front from the eurozone next week, but the markets will be watching out for the results of the European Parliament elections and what it might mean for the political and economic future of the bloc.
EUR/USD past year
USD: Jobs data takes centre stage
It’s Non-Farm Payrolls this afternoon. With all due respect to the fact that forecasting for these has been dreadful in recent months, NFP is forecast to rise slightly from its six-month low month.
The big event next week is the Fed’s interest rate decision on Wednesday, with inflation as the warm up act.
USD/GBP past year
For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business account manager on 020 3918 7255 or your Private Client account manager on 020 7898 0541.
