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The British economy stalled in July
Sterling has hit a two-week high against the euro this morning following news that the British economy is continuing to head out of recession.
GBP/EUR had already been boosted yesterday afternoon, following the European Central Bank (ECB) opting to keep interest rates on hold again. This was expected, as was the ECB president Christine Lagarde’s insistence that they would not be influenced by the USA’s rising inflation – announced on Wednesday – her mantra being that they would be “data driven” and make decisions on a month-to-month basis.
For the UK, on the other hand, analysts are anticipating that rising US inflation will mean the Bank of England making only two rate cuts this year instead of up to six that had been predicted not so long ago.
The UK’s Gross Domestic Product (GDP) result for February shows that the British economy grew by 0.1%, to a three-month average of –0.2%. While a deceleration from last month, this is slightly above expectations and takes annual GDP to negative growth of 0.2%.
Also released this morning, a final result for Germany’s inflation rate for March was confirmed at 0.4%, an annual rate of 2.2%, its lowest rate for two years.
Against the US dollar, sterling has yet to recover from its fall of roughly 1.5% following the latter’s rising inflation news and remains two-thirds of a cent down on the week.
Until today it has been a relatively quiet week for UK data, so you may have missed the RICS “House Price Balance” yesterday, which showed that the UK’s property surveyors are more optimistic about the housing market than any point for 18 months. The Royal Institution of Chartered Surveyors are seeing more buying enquiries than at any point in the past two years, with rising price expectations finally extending to London and the South East.
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: Pound’s rise threatened next week
Following this morning’s boost to GBP caused by the GDP data, sterling enters another round of high-impact data next week, starting with unemployment and earnings on Tuesday and inflation on Wednesday.
GBP/USD past year
EUR: Euro weakened by ECB’s data determination
The euro remains on the backfoot following ECB President Christine Lagarde’s pointed refusal to be influenced by the USA’s rising inflation level, and the single currency duly has weakened by around a quarter of a percent almost across the board over the past 24 hours.
The data continues this morning with final inflation results for France and Spain, as well as a speech from ECB policymaker Frank Elderson. Matters then quieten down until Tuesday’s ZEW Economic Sentiment Index for Germany and the eurozone.
EUR/USD past year
USD: Dollar holds onto inflation rise boost
The US dollar is still riding high against all comers this morning, unimpressed so far by the UK’s continued emergence from recession. USD/GBP is 0.66% up over the week and a good 2% over the month.
The week ends with Michigan Consumer Sentiment this afternoon and starts Monday with the much-anticipated retail sales, which in recent months have been up and down faster than the elevators at Macy’s on Christmas Eve.
USD/GBP past year
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