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The UK economy unexpectedly grew by 0.1% in the final quarter of 2024.
The UK economy grew by 0.4% in December and by 0.1% across the final three months of 2024. Both of those figures were higher than expected and help to ease the pressure on both sterling and the UK government, which has staked much on its ability to promote growth.
December provided the highest growth figures month-on-month since last March and were significantly better than the forecast 0.1% growth. As the news broke this morning, GBP/EUR made a sharp move upwards and GBP/USD reached its highest this week.
Yesterday, headline inflation in the United States rose by more than expected to 3% in January, sparking a swift US dollar rally. The pound and the euro each lost half a cent immediately after that data was announced but fought back in the afternoon to finish the day with honours roughly even.
Even with inflation rising, Donald Trump again made the case for lower interest rates. Federal Reserve chair Jerome Powell just so happened to be answering questions from the United States Congress yesterday. As ever, Powell was measured when it came to rate forecasts, saying “we are attentive to the risks on both sides of our mandate” – meaning the risks of cutting too fast and keeping rates high for too long.
HMRC is greatly underestimating the scale of tax evasion in the UK according to a cross-party parliamentary committee. The House of Commons public accounts committee suggested HMRC’s figure of over £5bn in lost tax revenue for the 2022-23 tax year was “likely being vastly underestimated”. The committee did not offer an estimate of the total figure.
The Russian rouble jumped by more than 3% against the US dollar yesterday. That followed the news that American teacher Marc Fogel had been released from detention in Russia and the subsequent announcement that Trump and Vladimir Putin were ready to begin negotiations to end the war in Ukraine.
This news contributed to the euro’s recovery on Wednesday but it should not be read as a guarantee of armistice. Any deal would likely require a lengthy period of negotiation.
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GBP: A major boost
Today’s GDP figures are an unexpected (but entirely welcome) boost for the pound. Fears had been building that a period of stagflation had arrived, and although many of those risks are still present, sterling will surely welcome an upturn in previously shaky economic fundamentals.
GBP/USD: the past year
EUR: Recovery mode
The euro retraced most of Tuesday’s losses against the pound yesterday and hit back after the US dollar’s inflation-induced rally. The threat of tariffs still dominates discussions and could be a stumbling block for the euro even as its leaders issue defiant, retaliatory statements.
GBP/EUR: the past year
USD: Inflation highlights tariff risk
With headline consumer price inflation at its highest since June 2024, markets are appraising the prospect of tariffs in a new light. Any trade restrictions will likely have an inflationary impact and that could be a drag on the US economy, and therefore to the US dollar’s relative value.
EUR/USD: the past year
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