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The recent wave of strikes this winter has cost Royal Mail £200m so far.
After a strong start to the week for the pound, things took a turn in the opposite direction on Tuesday. Worse than expected PMI data, in addition to ongoing inflationary pressures, saw sterling relinquish weekly gains against both the euro and the dollar. This morning however, the pound is stronger against the greenback, with fresh weekly gains.
Royal Mail have said the recent wave of strikes this winter has cost the postal firm £200m so far. The dispute with the Communication Workers Union (CWU), which began in August led to 18 days of walkouts;7 of those being over the festive period in December.
The Indian rupee climbed against the US dollar on Wednesday, which was helped by likely dollar inflows and gains in most major Asian peers. Read more about the Indian rupee, plus the pound, euro and dollar in our brand-new Quarterly Forecast which is free to download.
Across the pond, the Bank of Canada signalled an end to its aggressive tightening cycle in its first meeting of 2023, as it raised the target for its overnight rate by 25bps to 4.5%.
In the eurozone, data from the Ifo institute revealed that the latest business climate indicator for Germany rose by 1.6 points in January. This marked the fourth consecutive month of increase and the highest level since June last year.
In the US stock markets, the picture looked less optimistic with the Dow losing almost 300 points on Wednesday. Meanwhile, the S&P 500 and Nasdaq 100 also lost 1.2% and 1.9%, respectively. This was largely due to disappointing earnings which added to pre-existing recession concerns.
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GBP: PPI input falls again
On Wednesday, PPI input data released by the Office of National Statistics revealed that the headline rate of input prices in Britain fell by 1.1% in December 2022, following a 0.2% drop in November.
Today, sterling-watchers will be on the lookout for key releases such as labour productivity (quarter-on-quater) and CBI distributive sales.
GBP/USD over the past year
EUR: Up next, the ECB interest decision
Markets are currently expecting the European Central Bank to hike interest rates by 50bps next week and again (by the same amount) at the March policy meeting. Although this is in line with the ECB’s forecast, investors suspect things may deviate from the bank’s original predictions from Q2 onwards.
This follows the ECB warning that they could make multiple 50bp increases, and no cuts, this year. The Bank will make its decision next Thursday.
USD: Mortgage applications on the up
In the US housing markets, the latest mortgage applications data revealed that applications in the US jumped 7% in the week which ended January 20th 2023.
Data from the Mortgage Bankers Association showed this most recent rise follows a 27.9% surge in the previous period. Additionally, the data highlighted that applications to refinance a home loan increased 14.6% while those to purchase went up by 3.4%.
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