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The wind of change have hit Europe (rarrarorro / Shutterstock.com)
Sterling fell against almost all-comers yesterday, including 1% against the Swiss franc. However, losses against other currencies were relatively mild, with most of the damage already done on Wednesday. Volatility over the week added up to a loss of 1.6% against the euro but a gain of 1.3% against the US dollar.
Yesterday the European Central Bank (ECB) voted to lower its interest rate by another 0.25%. The sixth cut since last summer to, 2.5%, though, was followed by relatively hawkish comments that the pace would now slow down. Market expectations are now of just one further quarter-point cut this year, which helped to boost the euro.
What of the UK’s own interest rate, still at 4.5%? A host of Bank of England policymakers were speaking yesterday, and while some sought to play down the threat of the recent inflation rise to 3%, including the governor Andrew Bailey, others were less sanguine, including the BoE’s chief economist. So, no clear direction ahead of the next rate decision on 20 March.
The impact of President Trump’s tumultuous first few weeks have started to come through. US employers announced 172,000 job cuts in February – the highest level since July 2020 – as a result of Department of Government Efficiency (DOGE) actions. The Atlanta Fed’s GDPNow model says that the US is already seeing negative GDP, estimating that the US economy is shrinking by an annualised 2.4%. In the past 24 hours Trump and his team have been rowing back on some policies, delaying tariffs and rethinking many Federal job cuts.
On the data front, yesterday eurozone retail sales were revealed to have dipped by 0.3% in January – well below expectations.
There was bad news this side of the Channel, with UK construction in its worst shape for five years, according to the Purchasing Manager’s Index (PMI) for construction from S&P Global. The result of 44.2 was well below expectations (of 49.5), but still far better than Germany’s construction PMI of 41.2 and France’s 39.8
This morning we have had a reading for UK house prices from the Halifax, showing a fall of 0.1% between January and February.
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GBP: Mixed week for the pound
Yesterday was entirely negative for sterling, but across the week losses are significant only against the Swedish krona (down 3.5%), the euro (down 1.75%) the NOK (down 1%). Next week is another quiet one for data, with only GDP on Friday.
GBP/USD past year
EUR: Euro approaches weekend on a high
After a strong Wednesday, yesterday the single currency’s gains were pared back. Even so, the weekly gain has been impressive, with close to 4% pulled back against the US dollar and 1.5% against the pound.
EUR/USD past year
USD: Losses mount for dollar
Yesterday USD/GBP and USD/EUR hit their lowest level since mid-November, while the week’s losses against SEK are around 5.5%. This afternoon we’ll hear Non-Farm Payrolls. However, these are the pre-DOGE results so don’t expect fireworks. Wednesday next week is the inflation reading.
USD/GBP past year
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