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Sterling held firm on Thursday in the face of pressure from the US dollar.
The pound stood firm in the face of a brief US dollar fightback in yesterday’s session. GBP/USD is up by more than 1% this week, with GBP/EUR up by half a per cent. The euro has also found good traction against the US dollar, climbing by just under 1% to Friday.
American economic data was once again in the spotlight yesterday. It turned out to be something of a mixed bag, as building permits undershot expectations in April, while initial jobless claims came in above forecasts. Initial jobless claims still fell by 10k month-on-month to 222k, but that figure had been forecast to drop to 220k.
What should we make of that? It wasn’t immediately clear, but markets couldn’t resist trying to read the tea leaves. Various datapoints pointed to inflation easing at a different pace, depending on which way you looked at them. It was no surprise then that currencies didn’t really know what to do with themselves and a brief US dollar rally ran out of steam almost as soon as the water had boiled.
The European Central Bank (ECB) warned that high levels of debt leave member nations at risk of ‘adverse shocks’. The ECB’s most recent financial stability review warned that high debt levels and lenient fiscal policies could raise borrowing costs and leave markets vulnerable to shocks.
Japanese GDP fell by more than expected in the first quarter of 2024. In the first estimate, growth fell by 0.5% as wage growth sputtered and the nation dealt with an earthquake in the Noto peninsula. The Japanese yen fell by around 1% against the US dollar following the release.
Australian unemployment increased to 4.1% in April from 3.9% the month prior. That’s the highest rate of joblessness since January and it ultimately fuelled a brief surge for the Australian dollar over its American rival.
European democracies sighed with relief yesterday as Slovak Prime Minister Robert Fico’s condition was upgraded to stable following Wednesday’s assassination attempt. Police have since charged a ‘lone wolf’ for the attempt on Fico’s life.
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GBP: Inflation wanes
The pound clung onto recent gains against its rival on Thursday, perhaps helped by a clear path created by a light data schedule. The Bank of England’s Megan Greene was on the speech circuit, although her uncontroversial observation that inflation had waned since last July failed to move markets.
GBP/USD: the past year
EUR: ECB highlights debt
If you listen carefully, you’ll notice a distinct uptick in the number of financial figures discussing debt. That’s particularly true for the US, but now the ECB has rowed in. For now, it’s business as usual for the euro, but policymakers will be bearing this in mind moving ahead.
GBP/EUR: the past year
USD: As clear as mud
It’s all been slightly confusing in recent days for the US dollar. Markets now seem to think a September interest rate cut is back on the cards but basing that on only a handful of economic figures seems risky, particularly with all we’ve seen this year.
EUR/USD: the past year
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