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Unexpectedly strong US jobs data saw the dollar gain again on the pound and the euro. Meanwhile, poor UK industrial data saw GPB slip against EUR before recovering in the afternoon.
A report from S&P revealed UK construction has slowed, with its PMI falling to 53.3, the lowest in six months. Despite the Labour government’s stated aim of building 1.5 million homes over the next parliament, residential construction declined for the third month in a row.
The news of a weakening construction sector comes as UK long-term borrowing costs hit their highest level since 1998. If the high interest rates continue and the government cannot increase growth, the headroom Chancellor Rachel Reeves found in the last budget may be erased.
The big news out of the US on Tuesday was that job openings had increased by 259,000 to 8.01 million, significantly above the market’s 7.7 million. Though in a sign the American people still don’t believe their economy’s strength, resignations decreased by 218,000.
In Europe, a trove of inflation and unemployment data was in line with forecasts. Inflation in the eurozone rose for the third consecutive month to 2.4%, the highest rate since July. However, the unemployment rate held steady at 6.3%, a record low for the EU.
Later today, the US Federal Reserve will release the minutes of the December Federal Open Market Committee (FOMC) meeting where it decided a 25bps rate cut. The minutes will reveal the committee’s thinking, any hints of future rate cuts could create further market volatility.
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: Danger for the pound
Losing ground to the dollar and slipping against the euro, the pound is making a poor start to 2025. Weak growth and interest on long-term borrowing is putting the UK government in a difficult position.
GBP/USD past year
EUR: Strains on the euro
Although the euro continues to fall against the dollar, the EU’s record low unemployment rate is putting it in a good position against the UK. However, rising inflation rates may cause stresses for eurozone governments but support the euro.
EUR/USD past year
USD: Dollar bolstered by strong jobs data
Higher than forecast job openings in the US have bolstered USD, seeing it rise against GBP and EUR. Though, Fed minutes published later today could introduce volatility to the market.
USD/GBP past year
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