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The ECB will further loosen the eurozone economy today
Sterling drifted upwards yesterday against the US dollar after some disappointing industrial results seemed to reflect growing business worries in the world’s biggest economy.
GBP/USD came close – but no cigar – to breaking another three-year high. GBP/EUR drifted downwards but remains 1% stronger than a month ago.
Final Services PMI results for the UK were heading upwards to 50.9 and managed to pass US ISM Services PMI and German Services PMI on the way down to 49.9 and 47.1 respectively.
There were some positives for European business, however, with Spanish and Italian Services PMI all in positive territory above 50.
The European Central Bank (ECB) looks likely to cut interest rates to 2% today, after inflation fell below the target rate. That would make the main eurozone interest rate less than half that of the UK and USA. While Donald Trump has called on the US Federal Reserve to cut rates at its meeting in two weeks – following the ADP jobs report that showed private firms hiring new employees at the lowest rate for two years – there remain clear inflationary pressures which the Fed looks unlikely to ignore. The Bank of England governor Andrew Bailey made the same point about UK interest rates on Tuesday.
In economic news yesterday, the Chancellor of the Exchequer promised £15bn extra spending on transport infrastructure outside London in the Midlands, North and West Country. Today a bill will be presented to parliament aiming to boost pension savings and force pension schemes to invest more in Britain. And talks will continue between the US and UK aimed at removing tariffs on UK cars and steel exports to the US.
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GBP: Mixed day for sterling
Sterling lost against almost all comers yesterday, the exception being the US dollar. It’s a fallow period for data from the UK, but we’ll get a reading for new car sales shortly and tomorrow it’s the turn of house prices, from the Halifax.
GBP/USD past year
EUR: Euro gains ahead of ECB decision
A mixed day for the single currency too, with no clear pattern emerging from a mass of industrial data this week, ahead of the ECB rate decision today. We can expect a rate cut, the ninth in two years.
EUR/USD past year
USD: Only one direction for dollar
It was an unequivocally negative day for USD, with the largest falls against the yen and Swiss franc and missing a new three-year low against the pound by only the smallest of margins. There’s not much on the wires today, but watch out for Non-Farm Payrolls tomorrow, which will be closely watched after the negative ADP report yesterday.
USD/GBP past year
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