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UK unemployment rate decreased in July (mundissima / Shutterstock.com)
Sterling continued its balancing act against the euro yesterday, extending its highest, longest run, close to an 18-month high where it has been since the end of January. Against the US dollar it also remains well above the average of the past two years, albeit without seriously challenging any recent highs.
We’ve been hearing from some of the Bank of England’s interest rate setters this week. Swati Dhingra warned her fellow members of the Monetary Policy Committee (MPC) not to take risks with the economy and called for rate cuts now. Fellow MPC members Catherine Mann and Jonathan Haskell, however, continued to argue for a rate increase to 5.5%, saying that, in Haskell’s words: “The signs [on inflation] that we’ve seen thus far are encouraging. I don’t think we’ve seen quite enough signs yet.”
Next week is awash with high-level reports that may support either cause, but for now the data cupboard has been rather bare. Yesterday the RICS House Price Balance showed that property surveyors are considerably more confident than previously of a rise in property prices. They had been supported in this by the Halifax House Price Index rising by 2.5% year on year (albeit still falling in the southeast).
In China, meanwhile, inflation ticked upwards by 0.3% last month, although this still amounts to deflation of 0.8% on the year, the fastest plunge in prices for 15 years. Mexico opted to hold interest rates at 11.25% for a seventh consecutive session. It was also noted yesterday that for the first time in 20 years Mexico exported more to the USA than China did. This was more a case of reduced trade from China (imports to the US from China dropped by 20% to $427bn), than an increase of the $475bn trade from Mexico, but shows a changing pattern of global trade.
In the UK business news yesterday, the boss of the CBI argued against “large-scale” tax cuts ahead of the UK’s general election, saying that business needed stability.
A report in the Guardian found people aged over retirement age in the UK who cannot afford to retire. It came after the Pensions and Lifetime Savings Association said that the income required for a moderate standard of living for a single retiree had risen from £23,300 per year to £31,300.
In the US meanwhile, there was a damning report on President Biden’s fitness for office aged 81. A special counsel report had found that he could not be charged over holding onto classified files when vice president, because the president’s memory had “significant limitations.”
The president hit back at the report, saying: “I put this country back on its feet. I don’t need his recommendation.”
As noted, next week is a busy one for high-level data from the UK and sterling may struggle to hold on to recent highs. Therefore, 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 looks to inflation data midweek
A relatively quiet day for sterling yesterday, with the only serious movement a drop of 0.5% to the New Zealand dollar. However, this is the calm ahead of a big round of data releases next week, starting with unemployment on Tuesday and continuing with inflation on Wednesday.
GBP/USD past year
EUR: Euro maintains holding pattern
There has been little movement for the single currency since the start of February, at least against USD and EUR. The big event of the next week is the ZEW Economic Sentiment Index for the eurozone as a whole and Germany. The most recent reading was the most positive since February 2023, but will that continue? There will also be quarterly GDP on Wednesday.
GBP/EUR past year
USD: Dollar stalls as Biden-Trump in spotlight
Continuing the theme of the week, there was little movement for the world’s biggest currency yesterday, with minor losses almost all round. Next week we’ll hear inflation data, and no doubt the continued arguments over the main presidential candidates’ fitness for office.
USD/EUR past year
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