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Sterling bounced back against the US dollar and to a lesser extent against most other currencies yesterday, while weakening slightly against a resurgent euro.
GBP/EUR continued to soften, following a clear signal that the Bank of England will be cutting interest rates at its next meeting on 1st August. Several mortgage companies have been offering cheaper mortgage deals already, in anticipation. As Rightmove pointed out yesterday, the average mortgage has risen by 61% since 2019 and the average first-time buyer is now paying £1,075 per month, £667 more than in 2019.
The euro was the clear winner across the board yesterday, strengthening by as much as half a percent against the US dollar, yen and rupee. This followed a disappointing Ifo Business Climate report for Germany, which surprised the markets by declining to 88.6 from 89.3 last month.
In the UK, on the other hand, CBI Industrial Trends Orders were better than expected at -18, their best in three months.
In the UK general election, influential thinktank the Institute for Fiscal Studies (IFS) was scornful of the parties’ manifesto promises, saying the parties had “hidden and ducked” hard economic choices and that whoever won faced a choice of cutting services or raising taxes.
The markets have also been assessing what might be the result of France electing its first far right government since the Second World War, with the would-be next French Prime Minister Jordan Bardella saying he wants a €2bn cut in France’s contribution to the EU.
On the stock exchanges, there has been a sell off of US tech stocks, with the Nasdaq recording its biggest one-day drop in two months. Shares of Invidia dropped by 6.7%, taking it to a valuation more than $500bn less than last week.
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: Pound regains strength
Despite the euro’s improved position, the pound continues to stay at a level over 1.5% stronger than last year, while strengthening against the US dollar. There is little on the horizon to disrupt GBP from a data point of view today.
GBP/USD past year
EUR: Euro stabilises
The euro has started to stabilise again after its recent losses borne out of worries over political instability and interest rate cuts. We will shortly get a final reading for French GDP, but more influential is likely to be Germany’s GfK Consumer Confidence reading tomorrow.
EUR/USD past year
USD: Dollar’s slide continues
The dollar weakened across the board yesterday and by as much as a third of a percent (against the Aussie dollar). Coming up today is house price data. The most recent house price index showed US house prices at their highest ever, still rising at close to 7% in the past year.
USD/GBP past year
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