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Inflation fall has put the pound under stress
Inflation declined in the UK to 2.8% last month, below last month’s 3% and slightly lower than expectations. The result has weakened sterling in early trading, although the result was in line with Bank of England forecasts, if not the market’s assumption that higher costs for business, including the living wage, would pull through into prices.
There was an actual price drop (not just slower price rises) for women’s clothes, an extra boost to chancellor Rachel Reeves ahead of her Spring Statement today. There were falls in recreation and concert ticket prices too – welcome news to politicians who have to pay for such items themselves these days.
Unlike the Autumn Budget, her statement today looks likely to include some £15bn of spending cuts to meet her fiscal rules, which poses a further threat to sterling. According to data from Bank of America, large investors have been dumping the pound in the largest outflow of currency in two years. They warned of further losses.
The pound has so far this morning lost around 0.15% to the euro and a little more against the US dollar on the inflation news.
Yesterday the CBI’s gauge of retail sales for the UK showed its sharpest drop since last July, and we’ll get a clearer reading of that on Friday with the Office for National Statistics’ own data.
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: Slow growth for sterling
There was minimal movement for sterling yesterday ahead of the Spring Statement, but some progress against the euro, where the pound has now recovered almost 1% over the past week. On Friday a busy period for data ends with Retail Sales, where a sharp drop is expected from last month’s 1.7% growth.
GBP/USD past year
EUR: Euro on back foot
It was (almost) all downhill for the single currency yesterday, but most falls were limited to less than 0.5%, with AUD and CAD being the biggest winners against the euro. We’ve got a final result for Spanish GDP shortly – will it be confirmed as the best in Western Europe in 2024 at 3.5% growth?
EUR/USD past year
USD: Mixed fortunes for dollar
The dollar weakened against its Canadian and Australian counterparts yesterday, on a day that showed slightly worsening economic confidence across a broad range of measures. Tomorrow we’ll get a final result for GDP in the USA for the final quarter of 2024.
USD/GBP past year
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