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Growth forecasts for 2025 have been halved
Traders remained reasonably sanguine about sterling yesterday despite a dismal economic forecast and a fall in inflation that raises odds of an interest rate cut in May.
An early drop in GBP/EUR and GBP/USD after the fall in inflation to 2.8% was announced soon turned around and it ended the day where it began.
Weighing more on other currencies may have been the announcement of 25% tariffs on car imports to the USA. The EU exports some $45bn worth of cars to the USA annually and Canada close to $30bn.
Overnight we had a reading for UK car production figures, which fell 11.6% year on year to 82,000 cars. Electric car numbers fell, prompting industry calls for investment in charging infrastructure.
The chancellor’s Spring Statement contained no real surprises. The key points were an updated forecast from the Office for Budget Responsibility (OBR) for growth in the UK of just 1% in 2025 – down from 2%.
She announced quite hefty cuts in welfare spending, an extra £625 million to train construction workers, a rise in defence spending to hit 2.2% of GDP and a cut of 15% in administration costs of government, with some 10,000 civil service jobs to go.
Elsewhere, yesterday GDP in Spain was announced at 3.4% in 2024, almost the best in Europe. In the USA the big data release was Durable Goods Orders, which rose unexpectedly 0.9% month on month, beating forecasts of a 1% fall.
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GBP: Sterling shrugs off inflation fall
It was a mixed day for the pound, which fell early in the day as the chance of a May rate cut increased, but recovered on the news of car tariffs on Europe. Coming up tomorrow we have retail sales.
GBP/USD past year
EUR: Mixed day for euro
A day of small movements saw marginal losses against the pound and US dollar. Watch out for the GfK Consumer Confidence reading tomorrow, plus French and Spanish inflation.
EUR/USD past year
USD: Muted reaction to tariffs
Little movement too, for the dollar, with sub-0.20% gains on the euro, Canadian dollar and Norwegian krone. The main event today will be the US quarterly GDP figure at 12.30 UK time.
USD/GBP past year
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