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It's been a steady week for the pound with little movement following last week's losses against the euro and US dollar
Sterling remains relatively unchanged against the US dollar this morning as new data has failed to rectify the losses seen by the pound on Friday. This comes following a better-than-expected US jobs report and a 50bps interest rate hike from the Bank of England last week.
Against the euro, the pound started to regain some of its strength yesterday but remains 1% lower than it was this time last month.
Yesterday prime minister, Rishi Sunak vowed to slash sky-high energy bills as he reshuffled the governmental structure to focus on energy, climate net zero and innovation in science.
Sunak split the Department for Business, Energy and Industrial Strategy into three departments to focus on each target in more detail and in an attempt to soften the cost-of-living crisis.
Yesterday, Wall Street wavered ahead of Federal Reserve chair, Jerome Powell’s speech which is expected to give economists further clues on how long the central bank will keep interest rates high.
The US trade deficit widened to $67.4bn in December 2022 from a downwardly revised $61bn in November which marked the lowest reading since September 2020.
Yesterday, UK market-watchers heard the Halifax House Price Index increased by 1.9% in January 2023 on the previous year, marking the softest rise since October 2019 and above expectations of 1.8%.
Today is a quiet day for data releases, however tomorrow we will hear Germany inflation data which is expected to rise from 8.6% in December 2022 to 9.1% this month.
On Friday, markets will receive data for the UK on GDP which previously expanded 1.9% in the third quarter of 2022, considerably lower than market expectations of a 2.4%. It is forecast to increase by 0.2% in the year-on-year preliminary reading this week.
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GBP: Further interest rate hikes to come
In a speech on Monday, Catherine Mann, monetary policy committee member at the Bank of England said the central bank would raise interest rates again in March. This message goes against information issued by the bank at last Thursday’s Monetary Policy Report.
EUR: Down in the dumps
The euro continued to fall against the dollar yesterday as hawkish remarks from the Federal Reserve boosted the dollar. The euro is currently trading at the lowest rate we’ve seen since the first week of January and approximately 6.5% lower than it was in this time last year.
USD: Economic optimism soars
Yesterday the IBD/TIPP Economic Optimism Index increased to a 10-month high of 45.1 in February 2023, up from 42.3 in January. It’s worth noting that economists still believe the current reading to be in pessimistic territory.
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