020 7898 0500
Sterling fought back after a slight dip last week.
It was a week of ups and downs for sterling last time out, with economic data the key driver of the moves. Is inflation back for good or would November’s increase prove to be small potatoes? For many, the answer was the latter, although its hard to be sure when risks to the energy supply chain – a key driver of price increases – remain so pronounced.
GBP/USD lost around 0.5% over the course of the week, but the pound did regain some value after the initial shock of Wednesday’s data had subsided. The euro rebounded as expectations of early rate cuts were quashed. EUR/USD still lost three thirds of a per cent week-on-week.
Disappointing UK retail sales gave ever-fickle markets a chance to get over their inflation-induced strop. Sterling gained on Friday after it was announced retail sales fell by 3.2% in December as consumers staggered their spending over the Christmas period.
It seems we’ve been waiting for an age for the American economy to show signs of weakness. Yet even though the Federal Reserve sits tight on its 5.25% lending levels, initial jobless claims are down and economic activity is up.
This morning, US presidential hopeful Ron DeSantis announced he had pulled out of the race for the Republican nomination. His endorsement of Donald Trump all but clears the way for his main rival to win the race.
Here’s what to look out for this week…
Things start relatively slowly, with only a handful of impactful reads to begin proceedings. UK public borrowing statistics are available on Tuesday, when the Bank of Japan will also make their interest rate decision.
Wednesday brings manufacturing and services PMI in the EU and the UK but little else to get excited about.
The hardest hitting events all come in the second half of the week, however. The European Central Bank (ECB) is expected to leave interest rates unchanged at 4.5% on Thursday, which is the same day we’ll get Q4 GDP growth and durable goods figures from the US.
The UK and German editions of the Gfk consumer index then round the week out on Friday along with US personal income and spending.
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: Services in spotlight
Sterling lost a bit of value to the US dollar last time out, despite gaining by around 0.25% against the euro.
The services-heavy UK economy will come under scrutiny this week with the S&P services PMI for January. The index is now in positive territory, and any further jumps will see that figure move notably higher than the European equivalent.
GBP/USD: the past year
EUR: Holding steady
The euro shed about a quarter of a per cent against the pound while EUR/USD dipped by around half a per cent last week.
If recent comments from ECB policymakers are anything to go by, we shouldn’t be expecting any interest rate cuts soon. Christine Lagarde led a campaign to dampen expectations on that front last week, and the earliest it’s thought they’ll move is now June.
USD: No stopping growth
The US dollar had a solid week, notching notable gains against the pound and the euro.
The US economy keeps growing, even amid higher interest rates and a massive dose of uncertainty. Thursday’s GDP figures are expected to show economic activity expanded by 2% in the last quarter of 2024.
For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business Account Manager on 020 7898 0500 or your Private Client Account Manager on 020 7898 0541.
