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Sunak announced a general election for July 4th (chrisdorney / Shutterstock.com)
The cameras were lined up outside number 10 Downing Street yesterday as prime minister, Rishi Sunak confirmed suspicions that a general election will take place on July 4th, saying he had requested the dissolution of Parliament from the King.
The British pound approached a two-month high against the US dollar yesterday and remains within reach today.
Against the euro, sterling benefited from news of UK inflation falling to a three-year low early on Wednesday and continued to climb following Sunak’s announcement. Since this time last week, the pound has gained 0.85% against the euro.
The International Monetary Fund (IMF) suggested yesterday that the Bank of England has room for three interest rate cuts this year. The Fund also upgraded the UK’s growth forecast for 2024, saying the British economy is “approaching a soft landing” after 2023’s mild recession.
In the US, existing home sales declined for the second consecutive month in April, falling by 1.9% to 4.14 million, the lowest in three months and lower than forecasts of 4.21 million. Sales were down in all regions and the average existing home sale price reached the highest on record for the month of April.
Last night, the US Federal Reserve hosted its FOMC minutes, which suggested the Bank remains concerned about inflation and noted that policymakers expect it to take longer to have confidence in the inflation trajectory.
Later today, markets will receive the latest flash PMI results for Germany, the euro area, France, the UK and the US.
Headline economic figures expected tomorrow include UK retail sales for April and US durable goods orders – more on the latter below.
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GBP: “Inflation is back to normal”
The Office for National Statistics revealed that UK inflation fell to 2.3% in April 2024, from 3.2% in March. Edging closer to the Bank of England’s 2.0% target, inflation seems to be under control. Addressing the public yesterday evening, Rishi Sunak said “inflation is back to normal.”
GBP/USD: the past year
EUR: Is a rate cut on the horizon?
European Central Bank president, Christine Lagarde spoke to RTÉ Prime Time on Tuesday about rate cut expectations. “No predicament, no prescription, no commitment (…) if the data that we receive reinforces the confidence level that we have – that we will deliver 2% inflation in the medium term, which is our objective, our mission, our duty – then there is a strong likelihood.”
GBP/EUR: the past year
USD: Durable goods orders to decline
Tomorrow afternoon, US investors will receive the latest figures for US durable goods orders. Market forecasts expect a decline of 0.5% in April, from an increase of 2.6% in March, which marked the largest monthly advance since last November.
EUR/USD: the past year
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