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After a slow month for sterling, upcoming data could plot a new course
The first of a string of potentially influential data releases for the value of sterling has started negatively this morning with flatlining Gross Domestic Product (GDP) in July. Zero economic growth in the month pushed quarterly growth down to 0.2% after some positive news in May and June.
This week so far the Antipodean dollars and Norwegian krone have been on the ascendancy, while the US dollar has weakened. That drop was only marginal against the euro and pound. Indeed the past month has seen little movement overall between GBP, EUR and USD.
But will that last the current interest rate cycle? Yesterday’s US inflation reading was slightly elevated at 2.9%, but “core inflation” that strips out more volatile food and fuel rates held steady at 3.1%. The USA looks set for an interest rate cut next week, though whether it will be a quarter or half percentage point remains to be seen.
No such luck appears likely for UK mortgage-holders and businesses, when the Bank of England (BoE) makes its own interest rate decision a day later, on Thursday.
Ahead of that we have readings for unemployment and earnings on Tuesday and inflation on Wednesday. Neither result looks likely to knock the BoE’s Monetary Policy Committee off its cautious course, but it could all pile pressure on a besieged-looking government, reeling from high-level sackings and resignations.
Still, at least the government has a state visit from President Trump to look forward to. The Stars and Stripes are out on the Mall, and the good news for the anti-Trump demonstrations planned for London is that the week-long Tube strike will be over by then.
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 treads water ahead of busy week
It’s been a little quiet for sterling this week, with steady growth after a minor slump on Monday, taking GBP/EUR clearly above the five-year average once again. Next week we have lot of data coming through, including the interest rate decision on Thursday.
GBP/USD past year
EUR: Interest rates held again
The ECB made no move on interest rates again yesterday, while predicting a small rise in inflation to 2.1% next year and a rise in GDP to 1.2% this year (and 1% next year). This did little to affect the euro, which had a mixed day that included gains on the US dollar but losses more generally.
EUR/USD past year
USD: Dollar hit by inflation rise
It was a sea of red for the US dollar yesterday, though whether that was because of the increasing likelihood of an interest rate cut, or worries over economic performance, remains to be seen – maybe a bit of both. We’ll hear Michigan Consumer Sentiment this afternoon, ahead of a busy next week, including the Fed’s interest rate decision.
USD/GBP past year
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