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European currencies ended last week on the front foot.
Sterling opened the day close to a two-month high against the euro, as eurozone data highlighted a tempering of inflationary pressures. USD/GBP had yesterday beat back recent sterling gains, before the pound rallied overnight and into the morning.
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Wednesday brought a waft of encouragement in the form of continental data. German inflation declined to 3.2% in November, well below the expected 3.5%, while the headline Spanish number also waned. This morning, French inflation also slowed by far more than had been expected, down to 3.4% from last month’s 4%. That was the silver lining to the news that GDP had fallen by 0.1% in Q3.
More inflation reads follow today – from Italy and the eurozone as a whole. EUR/GBP fell back yesterday as lower inflation underscored cooling price pressures.
All eyes will be on the European Central Bank (ECB) as to when it decides to trim central rates. We should not, however, expect that decision to be made particularly soon, at least according to the OECD, which warned that rates in the eurozone may have to remain elevated until the end of 2025. Pressure may start to pick up for policymakers though as inflation falls in key member states.
Q3 US GDP figures contributed to a good day for the US dollar against other major currencies. Annualised GDP growth reached 5.1% in Q3, surpassing the 2.1% set in Q2 and higher than preliminary forecasts.
It’s something of a fallow week for UK data this time around, but you can always count on the market to pick up a few interesting breadcrumbs. One of those came yesterday with October’s mortgage approvals, which showed that net approvals for new housing lending rebounded more sharply than had been expected.
Opec+ is set to meet today in a closely-watched event for commodities markets. The oil cartel are expected to agree to cut production levels in an attempt to drive prices up amid weak demand.
Monolithic American diplomat Henry Kissinger has died at the age of 100. Kissinger leaves behind a complex legacy, both revered and reviled for his influence on cold war politics and the Vietnam war.
Nottingham city council yesterday issued a section 114 notice, in effect declaring bankruptcy due to significant gaps in its budget. Experts were quick to warn that an increasing number of councils were at risk of insolvency from high costs.
The UK’s competition watchdog is to investigate supermarket loyalty schemes in a bid to uncover if retailers have been raising prices by more than the cost of supply. That move was part of a tandem announcement, which saw the watchdog also pledge to investigate the cost of baby formula.
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GBP: Lending up in spite of rates
Sterling is nearing two-month highs against the euro, having fought off a USD/GBP rally to open today in a similar position against the US dollar.
Even as the Bank has attempted to stem the flow of credit through interest rates, October’s figures showed that new mortgage lending had rebounded, as consumers continue to grit their teeth and absorb tougher rates.
GBP/USD: the past year
EUR: Data drives euro slide
The euro slid back against both sterling and the US dollar yesterday, those losses driven by a bevy of data which suggested the ECB’s policy rates were starting to feed through to the economy.
Spain and Germany both unveiled promising inflation reads yesterday and will now pass the baton to Italy and the eurozone at large. We’ll also get European unemployment data today, so there’s much for currency markets to discuss.
USD: Crucial manufacturing print
The US dollar regained its footing in Wednesday’s session, advancing on the euro but giving some ground back to the pound after a strong start.
There are a couple of consumer spending metrics to look out for today, although this portion of the week will likely be dominated Friday’s ISM manufacturing index. Federal Reserve chair will round off the week with a speech tomorrow afternoon.
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