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GDP tumbled at the start of the year
Sterling continued its upwards trajectory yesterday, powered against the US dollar by a surprise for US Gross Domestic Product (GDP). America’s economy grew by an annualised 1.6% in the first quarter of 2024, nearly halving from Q4 of 2023 and its worst since early 2022.
On inflation there was bad news too. The measure used by the Federal Reserve to gauge underlying inflation, the core price index for personal consumption expenditures (PCE), increased from 2% at the end of last year to 3.7%.
Analysts now judge it more likely that the first interest rate cut from the Fed will in the autumn, and possibly even after November’s election. Stock markets fell as the news arrived, with various indexes falling by between 1.5% and 1.9%.
There wasn’t much to cheer in the UK either, with the Confederation of British Industry (CBI) reporting its worst fall in retail sales for a single month since the first month of the pandemic in April 2020. Car production also recorded its first fall in the UK for six months, with exports plunging by 39%.
A small ray of sunshine overnight, however, with the GfK Consumer Confidence indicator rising to -19, the first improvement for three months.
In business news, shares in Meta (owner of Facebook and Instagram) fell by 15% after Mark Zuckerberg said that the company needed to invest a lot more in artificial intelligence (AI) to make it profitable. Alphabet, on the other hand, owner of Google, saw shares rise by 13% as revenue rose to over $80bn, from less than $70bn last year.
A lot of companies have been issuing results, one of which was Barclays Bank, which saw profits drop by 12% as demand for mortgages and loans dried up.
Where politics meets business, the Labour Party announced plans for the rail industry in the likely event that it wins the next election. Private companies will continue playing a major role in the buying and leasing of trains, while passenger train companies are nationalised into Great British Railways.
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GBP: Pound rises despite dearth of data
Sterling gained as much as 0.5% against major rivals yesterday, taking the week’s gains on USD to 0.6% but approaching the end of the week marginally down on EUR.
Overnight we have had GfK Consumer Confidence, which showed an improving picture, rising to -19, but there follows a quiet end and a quiet start to next week for data from the UK.
GBP/USD past year
EUR: Positive week for euro so far
A good day against the US dollar and yen were the high spots in a week where the EUR/USD has gained 0.8%.
There’s a lot of lower level data coming in today, but on Monday matters liven up with Spanish and German inflation levels and then GDP on Tuesday.
EUR/USD past year
USD: Downhill for the dollar
It was (almost) all downhill for the dollar this week, as hopes for an early interest rate cut and economic soft landing ahead of the election dissipated. There will be more income and spending data coming out this afternoon.
USD/GBP past year
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