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The pound benefitted from a shift in risk appetite to post a stronger Wednesday.
Sterling started to recover some of its losses from earlier this week on Wednesday, as the mood in currency markets pivoted to something more positive.
GBP/EUR gained around a quarter of a per cent after letting go of some further advances in the morning session. GBP/USD climbed by a similar amount and the euro continued to trade well against the US dollar.
Despite having found its feet once again, currency markets continue to look to Japan with a degree of apprehension. The Japanese yen has been nothing if not volatile recently and that trend continued yesterday, as the yen fell by almost 2% against the pound and the US dollar.
The latest movements stemming from Japan have seen its stock market stabilise – the benchmark index Nikkei 225 has now all but recovered its huge losses from Monday. However, the assurance from central banker Shinichi Uchida that the Bank of Japan would not hike interest rates amid market volatility served to strain its currency.
Elsewhere, a quiet day for macroeconomic data helped markets regain their composure. August has a reputation for being a quiet month, but it has produced some major events in the past. Add to this the smaller volume of trades that take place and market shocks like we’ve seen this week can quickly spread.
France’s trade deficit fell to €6.1bn in June. That is the smallest deficit in three months, driven by higher exports and changes to how France distributes the energy it creates. The effect of a certain ongoing sporting event should begin to feed into the data over the coming months.
After what was a pretty bruising stretch, tech stocks staged a comeback yesterday. Amazon, Apple and Microsoft were all over 2% up shortly after the Wall Street open. The one outlier was Airbnb, whose shares dropped by 14% after it missed its second quarter earnings target.
UK chancellor Rachel Reeves was in Toronto yesterday as part of a plan to create a ‘Canadian-style’ government pension system. Reeves wants UK providers to have more market clout, which could be achieved by consolidated the countless fragmented schemes into a couple of megafunds.
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: Lower rates boost housing
The UK housing market is likely to be a main beneficiary of reduced borrowing costs. That process is already well under way according to yesterday’s Halifax house price index, which showed house prices climbed by 2.3% year-on-year in July.
GBP/USD: the past year
EUR: Benefiting from risk
The euro is enjoying the swift turnaround from Monday’s drama. As risk appetite improves, the euro has managed to cement its level against the US dollar, while keeping any losses to the pound at a bare minimum.
GBP/EUR: the past year
USD: More data arrives
Today’s initial jobless claims data is likely to be afforded more importance than usual. Should the number end up well under market forecasts, expect another strong pivot away from the US dollar. Hopefully the reaction is less hysterical this time.
EUR/USD: the past year
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