020 7898 0500
The pound struggled to escape the sour mood that ended last week.
The pound fell against the euro on Monday as last week’s cocktail of bad economic news hung like a cloud over the British economy. A sleepy early-week economic schedule meant little could transform sterling’s fortunes, although there may be a chance for that later in the week with inflation and October’s retail sales report.
The euro was the main beneficiary of the calm in proceedings. The euro paired an almost 0.5% increase against the pound with a 0.3% advance over the US dollar. GBP/USD rose ever so slightly but the pound is languishing near its lowest level since early July against the US dollar.
After last week’s plunder, there was a modest weakness in the US dollar to begin the week – a development that will not have escaped its European rivals. Markets are treading carefully ahead of more key UK data this week as well as a slight increase in geopolitical friction. Over the weekend, outgoing US president Joe Biden authorised the use of US-made long-range missiles in Ukraine.
The Australian dollar was given a boost overnight on the publication of minutes from the Reserve Bank of Australia’s last meeting. Policymakers discussed the need for caution to ensure inflation was kept at bay, which could mean a period of interest rates being held “higher for longer”.
The G20 meeting in Brazil sharpened attention on the ongoing threat to global economies. The new situation in Ukraine is said to be high on the agenda while for Britain, Sir Keir Starmer’s meeting with China’s Xi Jinping represented a significant moment of political realism. It was the first time a British prime minister had met Xi since 2018.
In another sign of the close relationship between Donald Trump and Elon Musk, Tesla shares jumped by over 7% yesterday on report that the president-elect will consider changing self-driving vehicle regulations. That came after an altogether less encouraging moment for Musk last week, when his unveiling of the new “Cybercab” prototype led to shares falling by 9%.
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: In thrall to others
Sterling’s short-term direction is likely to be closely linked to both data and the opinions of the Bank of England. Markets are currently fairly split between expecting a hold and a cut at its December meeting but more aggressive tones from either the European Central Bank or the Federal Reserve could bring more bad news.
GBP/USD: the past year
EUR: Late fightback
The euro has had a year to forget but it is looking to scrape back some of its losses against the pound. Despite having fallen by almost 5% year-on-year, the euro has climbed by over a cent against the pound in just one week. Based on current trends, ruling out a further improvement would be a very risky bet.
GBP/EUR: the past year
USD: T-minus two months
Donald Trump still has to wait two more months until he is sat in the Oval Office again. For the US dollar, there is a degree of uncertainty here as there is still much Joe Biden could achieve in the intervening period. For his part, some of Trump’s actions could startle markets ahead of Inauguration Day.
EUR/USD: the past year
For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business account manager on 020 7898 0500 or your Private Client Account Manager on 020 7898 0541.
