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A sunny day in Threadneedle Street but no cheer for mortgagees
A busy week on the currency markets has seen a blizzard of high-impact data and several interest rate decisions. The markets – and central banks – are clearly uncertain on the state of the global economy and whether to boost growth or bear down on inflation.
In the UK, the Bank of England (BoE) opted to hold interest rates at 4.5%, following on from the US Federal Reserve’s identical decision on Wednesday. It was an 8-1 decision from the BoE’s Monetary Policy Committee, a more hawkish turn than last time. The next rate decision won’t be until May and expectations are evenly split on whether there will be an interest rate cut.
UK inflation is now expected to hit 4% in the coming months, and the pound strengthened against the euro to its highest level since early March. We will get the latest inflation figure on Wednesday, but we also learned yesterday that the average UK wage rise in the past year has been 5.9%, almost twice the level of inflation. No wonder the BoE mentioned that employers were cutting back on hiring, further impacted by last year’s National Insurance rises.
Overnight the GfK Consumer Confidence Index has improved somewhat from recent months for the UK, while still being clearly in the negative. “It wouldn’t take much to unsettle the fragile consumer mood,” said their consumer insights director.
On Monday morning the markets will be analysing the Purchasing Managers’ Index (PMI) data. It’s a respected indicator of business mood across the world in three key sectors – Manufacturing, Services and Construction – and will be the first reading since the start of the Trump tariff regime.
On Wednesday it will be the chancellor’s Spring Statement. While not a Budget, it can have similar impacts on the currency markets. So 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 Business Account manager on 020 3918 7255 to get started.
GBP: Mixed fortunes for sterling
No surprises from the Bank of England led to a mixed day for sterling, with a smallish boost against the euro, but losses against the US and Canadian dollars and Norwegian krone. The data continues next week with PMI on Monday and inflation on Wednesday.
GBP/USD past year
EUR: Euro on the slide
The single currency took a dive yesterday, with small losses against the pound but more hefty losses against most other currencies. It’s a relatively quiet end to the week, but we launch into next week with PMI across the board.
EUR/USD past year
USD: No clarity for dollar
There was no clear direction for the US dollar either yesterday, as it made good gains on the pound, euro and Swiss franc while treading water against most others. There’s little coming out of the USA today, but Monday’s first PMI readings since the start of tariffs will be interesting.
USD/GBP past year
For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business account manager on 020 3918 7255 or your Private Client account manager on 020 7898 0541.
