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The IMF office in Washington DC ( Kristi Blokhin / Shutterstock.com)
The euro lost out to sterling yesterday but gained on the US dollar, after the European Central Bank (ECB) kept interest rates on hold – as expected – and said that inflation was falling faster than forecast.
While GBP/EUR strengthened for a while, it didn’t last. However, sterling climbed to its strongest level against the US dollar for several weeks and has remained there.
From the ECB yesterday the new eurozone inflation projection is an average of 2.3% in 2024, falling to 2% in 2025 and 1.9% in 2026, with core inflation only fractionally higher than that.
In the UK, the Halifax house price index slipped back to 0.4% month-on-month, or 1.7% for the year.
Unlike some years, when the budget falls apart spectacularly over the following days, Jeremy Hunt’s spring budget has held together, albeit with the chancellor being labelled the ‘fiscal drag queen” for failing to raise tax thresholds yet again. British retirees will have realised they are losing out on tax cuts, since they do not pay National Insurance Contributions, with the average over-66 losing £840, while those aged 18 to 45 gain £590.
The IMF has said that the UK will need more tax rises to stabilise UK debt, which the Institute for Fiscal Studies (IFS) warning that the next chancellor faces the hardest task of any since the end of WW2.
In US politics, President Biden came out fighting in the State of the Union address last night, hailing an “American comeback” in the economy and sparring with opposition politicians.
And showing that age is no barrier to optimism, 92-year-old Rupert Murdoch announced his engagement to what will be his sixth wife, a 67-year-old Russian scientist.
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GBP: Sterling climbs again
Sterling bobbed to the surface again yesterday, despite the grim state of the nation’s finances according to some analysts, if not the chancellor, making his round of the TV studios post-budget.
Next week starts a fresh round of high-level data, starting with unemployment on Tuesday and then GDP on Wednesday.
GBP/USD past year
EUR: Under control inflation cools currency
The single currency’s fortunes diverged yesterday with gains on the dollar and falls against sterling. After the excitement of yesterday’s ECB announcement, later today we will get a reading for eurozone employment and GDP. Europe is crawling slowly out of recession, according to the forecasts.
EUR/USD past year
USD: US jobs data to the fore
It’s the first Friday of the month so its Non-Farm Payrolls in the USA this afternoon, with America’s key measure of the labour market expected to show a significant drop to around 200,000. However, judging by recent NFPs the only surprise would be no surprises.
USD/GBP past year
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