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There was no hiding place for sterling yesterday
It felt like some chickens were coming home to roost yesterday as the pound fell, fell again and then fell some more. The immediate reason was the finding from the Office for Budget Responsibility (OBS) that the Chancellor of the Exchequer will need to find another £20bn to make up for falling UK productivity and stay within her fiscal rules in the Budget, now four weeks away today.
Sterling hit its lowest against the euro since April 2023 and against the US dollar since August. Currency movements elsewhere in the world were minimal, despite there continuing to be high level data released, and just ahead of some vital interest rate decisions in the USA and Canada today, Japan and Europe tomorrow.
In Germany the GfK Consumer Confidence Index worsened to -24.1, its lowest reading since April, but just a day after the Ifo Business Climate repeated the PMI reading in showing German business in a bullish mood. New cars were certainly selling well in Europe, a 10% year-on-year increase throughout the bloc but driven by Europe’s current star economy, Spain. We’ll hear shortly if Spain’s economic heroics continue with Gross Domestic Product (GDP) for Q3.
Also in transport news, Wizz Air is to begin trialling business class-style tickets, by letting passengers book an empty seat next to them. The company, which currently ranks lowest among UK operators for customer service according to Which?, also mentioned that it was using AI to calculate fuel consumption closer, which isn’t worrying at all.
In business news, The FTSE 100 hit a new high for the fourth day in a row, while Microsoft and Apple joined Nvidia in seeing their value hit $4trn.
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GBP: Pound felled by OBR downgrade
The pound weakened by up to 1.5% against major rivals after the OBR growth downgrade and its likely impact on tax policies in next month’s Budget. Coming up shortly, some mortgage and consumer credit data from the Bank of England.
GBP/EUR past year
EUR: Blizzard of data surrounds ECB decision
We’re about to hear Spain’s GDP, but in the meantime the single currency continues its patchy performance. It rose strongly against the pound yesterday but weakened against most other pairs. Watch out for the interest rate decision from the European Central Bank (ECB) tomorrow – not the decision itself so much as the comments from policymakers afterwards.
EUR/USD past year
USD: Dollar weakens as Powell limbers up
There were falls almost across the board yesterday, with just the pound offering a little green on the charts. Federal Reserve Chair Jerome Powell will be making the latest interest rate pronouncement this evening, with a 25 basis point reduction to 4% widely expected.
USD/GBP past year
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