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The Fed makes its interest rate decision today
It was a turbulent day for sterling yesterday, with sharp rises and falls for GBP/EUR, but continued growth against the US dollar.
European exporters including Porsche and Heineken have been warning that the strong euro – on top of tariffs – is a serious threat to their business. The euro is 10% stronger against the US dollar than in January.
In the UK, representatives of the British film industry have warned that if a levy of 100% on movies made outside the US, as threatened by Trump, is imposed it would wipe out their industry.
The warning came amid a generally depressing set of data for the UK yesterday, all on the back of the trade war. The final result for the Purchasing Managers’ Index (PMI) showed increasing pessimism in the service industries, as the index fell to 49 from 52.5 the previous month. Anything below 50 signals contraction in the industry, and this is the first such result for 17 months. Also yesterday, new car sales fell by 10.4%.
On the plus side, the UK has agreed a trade deal with India, announced yesterday. It will, says the UK government, boost trade by around £25bn per year by 2040. Also in that region, India has struck militarily at targets inside Pakistan, in response to a recent terrorist attack which it blamed on its neighbour. If this conflict worsens it could produce a more “risk off” mood in the markets and strength to safe-haven currencies such as the yen, Swiss franc and USD.
This afternoon there will be an interest rate decision from the US Federal Reserve (“The Fed”) and tomorrow it is the turn of the Bank of England. While the Fed is not expected to cut rates, the Bank of England is, by 0.25%. Any divergence from that is likely to cause even more volatility in the markets than we have seen recently.
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 Business Account manager on 020 3918 7255 to get started.
GBP: Sterling on the rise
Sterling had a positive start to the working week. Strengthening by a third of a percent against the euro and twice that much against the US dollar and Swiss franc. Some of that was later reversed. We are waiting for Construction PMI numbers, but all eyes are on the interest rate decision tomorrow.
GBP/USD past year
EUR: Mixed day for euro
The single currency was in two minds yesterday – weakening against the pound, yen and krone but gaining on the US dollar. It was a decidedly mixed bag for final PMI results across the eurozone too, but including a positive result for Spain, also with unemployment falling.
EUR/USD past year
USD: Dollar in retreat
It was a sea of red for US dollar pairs yesterday, as the markets fell ahead of the Fed’s interest rate decision today. The biggest falls were against the yen (down 1%) and Norwegian krone (down 1.2%). There wasn’t a great deal for the markets to go on, but on Monday we had mixed results for PMI.
USD/GBP past year
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