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The US dollar index climbed to a two-year high yesterday.
Sterling found some traction yesterday afternoon, which provided some badly needed respite in the face of unfavourable market conditions. GBP/EUR and GBP/USD were both little changed over the course of the day, representing a pretty good outcome after recent turmoil.
There has no such drama for the US dollar. In fact, the US dollar index (a measure of its relative strength against a basket of key currencies) moved close to its strongest in two years, as recent jobs data continues to support the view that the Federal Reserve will not be in any rush to slash interest rates.
Without much in the way of data to focus on, bond markets were again in the spotlight. Their well-publicised concerns may have been eased by Keir Starmer’s refusal to rule out further spending cuts. The prime minister promised his government would be “ruthless” in cutting costs as part of a broad spending review, while also attempting to return focus to growth with a string of AI policies.
In news that could impact a large number of expats, Spain’s prime minister Pedro Sánchez yesterday announced a plan to impose a 100% tax on real estate sales by non-EU buyers. The move comes amid growing public anger at the housing crisis and overtourism in certain regions. “The west faces a decisive challenge: to not become a society divided into two classes, the rich landlords and the poor tenants”, Sánchez said.
Chinese exports increased by a massive annualised rate of 10.7% in December. That helped China’s trade surplus to widen to almost $105bn last month.
If you’re looking for a document that can help you make sense of these developments, make sure to secure your copy of our January-March Quarterly Forecast. Keep an eye on your inbox as the first of these will be arriving hot off the press later today.
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 volatility likely has further to run
The calm that descended on UK markets yesterday may well prove to be fleeting. With several high-impact economic releases this week, there is a real risk that the anxiety that marked last week makes an unwelcome return.
GBP/USD: the past year
EUR: Eyes on German GDP
Germany’s full-year GDP growth report on Wednesday represents an interesting chance to measure the scale of upheaval in Europe’s largest economy. The economy shrank by 0.3% in 2023. Could a better performance give the single currency a boost?
GBP/EUR: the past year
USD: Dollar drags euro nearer parity
EUR/USD remains firmly under pressure. In fact, the US dollar moved closer to parity with the euro yesterday as central bank policy drifts even further apart.
EUR/USD: the past year
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