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It's been downhill for sterling this week
Last week the economic data turned against sterling, with predictable results. The pound has lost close to 0.75% against the euro over the past week, 2% against the US dollar and somewhere between those two against other major rivals.
Last week ended with GDP data revealing economic performance far below expectations. Quarterly GDP from July to September was cut to growth of just 0.1% (compared to 0.5% the previous quarter) and the economy shrank in September.
That wasn’t all. Unemployment rose sharply, construction orders collapsed to -9.4 and quarterly labour productivity was at its lowest since the same quarter three years ago.
Some analysts blamed the downbeat messaging from the government. While the betting remains against an interest rate cut at the Bank of England’s next meeting on 19 December, it’s less unlikely than it looked before, which will also have weighed on sterling.
The dollar, on the other hand, has been boosted by American business and investors deciding that the re-election of Donald Trump will be good news for them. But economic success from the current administration’s policies has also boosted USD. Jobless claims were well down and one economic optimistic index was at its highest since August 2021, leading to US Federal Reserve chair Jerome Powell to downplay hopes of an interest rate cut at its last meeting of the year.
Coming up this week, the G20 meeting starts today in Brazil, although with the shadow of Trump leading the free world again in two months little may be decided.
Sir Keir Starmer may be pleased to avoid the growing campaign from farmers about inheritance tax, with tens of thousands expected to protest in London this week (despite only a few hundred being affected by the change each year).
There is plenty more UK data coming down the wires this week, starting with inflation on Wednesday.
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GBP: More high level data threatens pound
After last week’s drop in the value of sterling, virtually across the board, what does this week hold? Not a great deal on the data front until midweek, when matters liven up considerably with the inflation reading. Then there is retail sales data and PMI on Friday.
GBP/USD past year
EUR: ECB policymakers on the airwaves
About the only bright spot in the single currency’s week was its improvement against sterling (albeit it is still close to two-year lows).
There will be comments from key members of the European Central Bank (ECB) over the next few days, as we approach their next interest rate decision in 10 days. Is another rate cut on the cards?
EUR/USD past year
USD: Six-month high for US dollar
The dollar’s gains continued into the week after the election result, again with the pound the biggest loser. On Friday USD/GBP hit its best rate since May this year. It’s looking a little quieter for data this week, but will there be more ‘interesting’ picks for Trump’s cabinet posts? One thing to look out for is the NAHB Housing Market Index this afternoon.
USD/GBP past year
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