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The pound and the euro enjoyed a strong outing against the US dollar on Wednesday.
A day of European success saw the euro and the pound each climb to their highest level against the US dollar this year. Robust building data failed to prevent more pressure being heaped on the US dollar, while UK inflation data supported sterling.
Over the course of Wednesday’s trading, GBP/USD climbed to its highest since July 2023, while EUR/USD briefly touched its highest since December. Both would fall back slightly in the afternoon, but the impression of US dollar weakness would not go away.
UK unemployment meanwhile came in unchanged at 4.4% in May, as had been widely expected. While that figure is still reasonably low, joblessness remains at its highest since September 2021.
Has the door now been closed on a Bank of England August rate cut? Currency markets certainly seem to think so, judging by the pound’s resurgence and the US dollar’s relative freefall.
UK house price inflation picked up to 2.2% in May, the third consecutive month of rises. Private rents increased at a slightly slower rate than the month before but remain elevated at an eyewatering annualised rate of 8.6%.
Inflation in the eurozone was confirmed at 2.5% in June, having reached 2.6% in May. Price rises fell in Germany, France and Spain but increased in Italy.
The aforementioned US construction figures showed US building permits had increased by almost 50,000 in June from the month before. This read typically isn’t one of the big hitters, although it may have had more of an impact had markets not been quite so excited with all the talk of interest rates.
Keir Starmer’s new government gathered in the House of Lords yesterday for all the pomp and pageantry of the King’s speech. Notable bills presented to the King included planning regulation, railway nationalisation and the formation of a state energy company, along with a handful of deals knocking around the crevices of the sofa after the hastily announced election.
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GBP: Shake it off
News that UK inflation had remained unchanged at 2% in June was partly blamed on Taylor Swift, of all people. The US pop-star’s mammoth UK tour led to a significant increase in hotel and transport costs last month, a phenomenon already reported by Sweden after their visit from the globetrotting singer.
GBP/USD: the past year
EUR: Giving themselves time
News that eurozone inflation came in at 2.5% in June is unlikely to convince the European Central Bank to change interest rates today, according to the majority of the financial world. However, policymakers are likely biding their time to the next cut, which is probably not far away.
GBP/EUR: the past year
USD: Building does little
An increase in building permits only served to slow a US dollar fall. Markets are very much pricing in those Federal Reserve cuts, which has led to a painful drain in US dollar appetite over this week.
EUR/USD: the past year
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