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The IMF lowers its growth forecasts (rafapress / Shutterstock.com)
The pound’s long slow recovery against the euro continued yesterday, reaching a three-week high, while a drop against the US dollar mid-morning righted itself by the end of the day.
There were no major data releases yesterday, or today, but there will be several speeches by central bankers, including Christine Lagarde, president of the European Central Bank (ECB), as well as some of the US Federal Reserve’s interest rate setters.
The IMF and World Bank are meeting this week in Morocco, in the shadow of the greatest sell off of government bonds in decades, leading to higher borrowing costs for governments.
Before that, Bank of England policymaker Catherine Mann was relatively hawkish in comments yesterday, saying that monetary policy: “has to be more aggressive because it has to address both a drift in expectations as well as the actual inflation”. While this will have surprised no-one, it suggests that interest rate rises may not be done with yet.
In the markets, the effects of the atrocities in Israel and their aftermath as the battle is taken to Hamas are beginning to be felt in rising gas and oil prices and falling share prices for airlines. It also caused a reversal, or at least a blip, in the sell-off of government bonds as investors looked for safe havens.
The Israeli shekel (ILS) fell to its lowest level in seven years against the dollar and five years against sterling.
In the business news, a survey from accountancy firm BDO found that companies’ hiring intentions are at their lowest for a decade. Its employment index has fallen for the third month in a row.
In politics, shadow chancellor of the exchequer Rachel Reeves was speaking at the Labour Party Conference in Liverpool. The former Bank of England economist promised fiscal discipline, saying “You cannot tax and spend your way to economic growth.” She also coined the word “securonomics”, promising a new deal between private and public finance and a safer pair of hands on the economy.
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GBP: Pound continues recovery against euro
After a lively start to the week, sterling ended the day slightly up on the euro and US dollar and 1.5% stronger against the Chinese yuan.
Sterling has climbed to a three-week high against the euro but has continued essentially moving sideways against USD.
Attention has turned to government debt lately, and today will be the 16-year Index-linked Treasury Gilt Auction, with the 10-year Treasury Gilt Auction tomorrow.
GBP/USD past year
EUR: Markets look for economic signals
A mixed day for the single currency saw it fall against all but USD and CNY.
There is not a great deal of news on the wires today, but tomorrow we’ll have a final German inflation rate. In the preliminary reading it showed a huge fall from 6.4% to 4.3%, will that be confirmed?
USD: Central bankers take to the stage
The US dollar’s safe haven status appears to have been short-lived, with falls against most other major currencies.
Several members of the Fed’s rate setting committee the FOMC will be speaking today, and then tomorrow we have Producer Price Inflation (PPI) a good indicator of where CPI inflation will be heading.
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