020 7898 0500
UK inflation fell to its lowest since September 2021 in March.
UK inflation slowed to 3.2% in March, below February’s 3.4% but slightly higher than forecasts of 3.1%. That’s still the lowest headline rate since September 2021. Core inflation meanwhile also fell back to 4.1%.
The pound and the euro continued to cede ground to the US dollar yesterday as stock markets shrank back and jittery investors flocked to the safe haven currency. The threat of crisis in the Middle East loomed large once more with Israel and Iran trading worrying threats of reprisals.
The pound is now down by over three cents against the US dollar compared to last month. GBP/EUR remained stable, while EUR/USD has also lost around 2.5% in value since the middle of March.
Despite the gloom, the German ZEW Economic Sentiment Index shot up to 42.9 this month, beating forecasts of 35.9. In fact, that was the highest score in the survey since prior to the outbreak of war in Ukraine, as analysts expected a stronger European economy and stronger euro.
In a speech last night, Federal reserve chair Jerome Powell warned markets that high inflation may delay interest rate loosening. Powell has more power than most to influence currency markets, so his comments may serve to weaken the US dollar should risk appetite shift towards something more positive.
It looks like it’s just a matter of time before the Japanese government intervenes to prop up the yen. The Japanese yen continues to circle around its lowest against the US dollar in 30 years, prompting assurances from numerous government officials that they would not let the currency slide too far.
Our latest Quarterly Forecast was published yesterday and you can get your copy (free of charge, naturally) by clicking the link here. The report looks in detail at all the trends that might impact your budget, from interest rates and the economy to shipping costs and elections.
Elsewhere, the International Monetary Fund (IMF) forecast that the US economy would grow at twice the rate of the rest of the G7 this year. Analysts predicted that US GDP would climb by 2.7% in 2024, more than double its projected growth of 1.2% for Canada, the next best performer.
In a handy pinch of serendipity that helps to underscore what we always say about risk, less than three weeks into the quarter, the lower end of the GBP/USD range forecast by seven of the world’s preeminent banks has already been breached. That just goes to show that when it comes to your money, it’s better to be safe than sorry.
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: Stubborn wage growth
Unemployment rose in February, although the stubborn growth in average earnings almost stole the headlines. In the three months to February, average earnings including bonuses fell slightly from 6.1% to 6%, while average earnings excluding bonuses were unchanged at 5.6%. That may prove significant when the Bank of England comes to make its next interest rate decision.
GBP/USD: the past year
EUR: Short order
In a speech yesterday, ECB President Christine Lagarde said the central bank was on track to cut interest rates “in reasonably short order”. Without any major shocks, the ECB should be able to move soon, Lagarde predicted.
GBP/EUR: the past year
USD: Tools down for now
US building permits and housing starts both fell in March. The number of new permits fell by 4.3% to a seasonally adjusted annual rate of 1.5mn last month, the lowest level since last July. There’s a seasonality to homebuilding, of course, but it was still a notable decrease in activity.
EUR/USD: the past year
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.
