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Sterling finally hit its highest level against the euro for 18 months yesterday, after threatening to for the whole of January.
GBP/EUR is now more than 1.7% stronger than the start of the year and 3% stronger than a year ago. A very different story for GBP/USD, however, where a distinctly choppy month continued with the pound falling again.
The euro has been the worst performing currency in recent days, slipping due to the growing possibility of an interest rate cut as early as April. Two of the European Central Bank’s policymakers suggested as much yesterday, with the boss of Slovakia’s central bank saying: “The next move will be a cut, and it is within our reach.”
On the data front it was a quiet start to the week, but this morning we will be getting GDP data coming in from across the eurozone, with France, Spain, Germany and Italy reporting quarterly GDP that is likely to show that the eurozone has been and continues to be in recession. There is inflation data coming in too.
Very little from the GBP side of the equation this week other than the Bank of England’s interest rate decision on Thursday. No rate cut is expected until at least June, however.
This is despite a distinct cooling in the UK labour market, according to the job search engine Adzuna. It found that job vacancies fell by nearly 7% – to 929,000 jobs – between November and December. This is the largest monthly fall since June 2020.
The effect of interest rate rises continues to be felt in the housing market, with the Zoopla House Price Index showing that sellers are having to cut prices to make a sale. However, Zoopla noted that annual house price falls have slowed from 1.4% in the year to October to 0.8% last month.
Elsewhere on the currency markets, the Hungarian forint hit its lowest level since November, taking its 2024 losses to 3.6% against the US dollar.
Train drivers represented by ASLEF will be staging a ‘rolling’ walk-out starting today and ending on February 5. There will be ‘little or no services’ for five days with an overtime ban.
Following a sharp increase in US gas exports to Europe, the day-ahead price of natural gas in the UK jumped 3.65% to 71 per therm. This move could threaten more than a dozen gas export terminals.
There is no shortage of potentially market moving events from the USA this week. The interest rate decision on Wednesday will be bookended by two important data reports on the labour market: JOLTS job openings today and Non-Farm Payrolls on Friday.
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: Sterling’s steady gain in quiet week
Sterling continued to tick upwards against the euro yesterday, while making little headway anywhere else and, indeed, falling by between a third and half a percent against the yen and Australasian dollars.
Later this morning we will get some data on mortgage approvals and lending to individuals.
GBP/USD past year
EUR: Euro suffers from rate cut belief
The euro continued to weaken yesterday as evidence builds of the eurozone’s hard landing from the interest rate rising cycle.
The data is coming in thick and fast today. Watch out for French and Spanish GDP and inflation shortly, with the all-important German economic results soon after. Few expect growth, but will the drop at least have moderated?
Tomorrow the data continues with German inflation.
USD: Dollar stable as jobs data imminent
The dollar moved very little yesterday, in a day with little to excite the markets. That may change this afternoon with the first of the month’s big labour market readings, JOLTS job openings, leading up to the Fed’s interest rate decision tomorrow.
That will be followed on Friday with Non-farm payrolls.
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