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Sterling bounced back in some style yesterday, gaining around 0.5% against the euro and US dollar. GBP/EUR is still over 1% down on last week but GBP/USD has recovered last week’s losses.
Those factors that led to the pound’s downfall – a dovish Bank of England, fear of US recession and stock market falls – are all being downplayed or reversed now, and more of a risk-on attitude has returned to the markets. This includes buying up the now-cheaper tech stocks, such as Apple which had dropped by 11%.
The stock market recovery was supported by better-than-expected jobs data from the US yesterday, which calmed some recession worries.
Yesterday’s data from the UK included a surprising report from the UK’s chartered surveyors. The RICS House Price Balance dropped to -19, indicating that more surveyors than before expect house prices to drop. This flies in the face of the house price data from the Nationwide and Halifax recently, which showed a recovering housing market. Optimism was further supported by house-builder Persimmon, which says the market has been boosted by large pay rises for key workers such as teachers and doctors.
Meanwhile, there was also a report from the Ministry of Justice showing UK mortgage repossession claims at a five-year high, rising by 24% year on year to 5,343 in the second quarter of 2024. Hardly a surprise given interest rates rising to a 16-year high, and yet repossession claims are still below the levels pre-pandemic.
At the other end of the money-worries scale, Barclays Bank has become the first UK bank to scrap the EU bonus cap. Bankers can now earn bonuses of up to 10 times their salary – compared to a cap of double their salary within the EU.
Also in business news, Disney is reported to be ready to spend $5bn in the UK and Europe, as the company basks in the success of some recent movies Deadpool & Wolverine and Inside Out 2.
However, returning to the currency markets, next week is a busy one for high level data in the UK, with all of those factors that govern interest rate decisions being reported on through the week.
Having seen a significant reversal in the fortunes of sterling this week, 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 gains
The pound regained some of its recent losses yesterday, though without the impetus of any new data – more a rebound or correction from over-pessimism. Next week there will be plenty of real-life data for the markets to ponder, including unemployment on Tuesday, inflation on Wednesday and GDP on Thursday. Busy!
GBP/USD past year
EUR: Euro on two tracks
A decidedly mixed day for the single currency, with falls against all the dollars (especially AUD) and sterling but gains on the yen and Swiss franc, as investors take a more positive attitude to risk.
Next week we continue with final results for inflation across the bloc, plus the ZEW Economic Sentiment Index for Germany on Tuesday.
EUR/USD past year
USD: Dollar up but inflation readings loom
The US dollar recovered yesterday against the yen, rupee and CHF as better unemployment data emerged, with only 233,000 jobs lost compared to 250,000 last week, and stock markets recovered. We have a quiet few days until Producer Price Inflation (PPI) on Tuesday and Inflation on Wednesday.
USD/GBP past year
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