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A bad day for the pound, and London commuters
Sterling seemed to take its cue from the unremittingly grim English weather yesterday, losing between a quarter and half a percent against leading pairs. This was despite good news on the economy from the Office for National Statistics first thing, with GDP (gross domestic product) up by 0.3% in November.
And this in itself was despite the Budget being delayed to late November having supposedly damaged the economy. The service sector got most of the credit, while car production ramped up after the late summer’s cyberattack. Nevertheless, sterling-euro is holding firmer than most and only a little off its recent four-month high.
The GDP result is likely to delay further interest rate cuts. The Bank of England’s next decision is in early February, so there is plenty more data to come, but so far this looks like just enough to keep the Bank happy on current rates.
A cut might have been good for the property market, but slipping out overnight was the RICS house price balance, a survey of chartered surveyors. In December they continued to be broadly pessimistic about the housing market – especially in London and the South East.
Looking at bigger numbers, yesterday Germany revealed its GDP growth for 2025 at 0.2%. This is about as anaemic as growth can be, but still a relief following two years of declines. The eurozone reported its trade balance narrowing to €9.9bn – quite a disappointment given a forecast of more than €15bn. And further worries for European business over Trump’s attempted takeover of Greenland. France’s finance minister met with his US counterpart Scott Bessent and warned of the effect on trade should Trump pursue this policy.
In business news, UK financial regulators have won a legal battle against some institutions such as Revolut, Visa and Mastercard which they say are overcharging fees on customers for cross-border transactions. Such fees have risen from 0.2% to 1.5% post pandemic and the regulator wishes to impose a cap.
And while restaurateurs, already beleaguered by higher business rates and national insurance, have also had to contend with the public taking appetite suppressant drugs, the drugs have brought good news for other sectors. A Wall Street bank has pointed out that airlines will save hundreds of millions of dollars each year as weight loss drugs such as Ozempic slim down passengers, meaning they will need 1.5% less fuel.
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: Week ends on negative despite growth
Sterling lost up to half a percent against leading pairs yesterday even after positive news on the economy that probably killed off an interest rate cut next month. We’re back in sniper’s alley for sterling next week, with unemployment, inflation and PMI all coming out.
GBP/USD past year
EUR: Single currency on back foot
Overall, the single currency performed even worse than sterling last week, but the losses were minor against its major partners (although substantial against RUB, MXN and ZAR). We’ve got final inflation data coming out for 2025 on Monday.
GBP/EUR past year
USD: No rate cut yet, says Fed policymaker
The US dollar was looking strong yesterday against all but the resurgent Australia dollar. The US dollar was supported by comments from US interest rate setter Raphael Bostic who indicated that he would be against a interest rate cut in the near future.
USD/GBP past year
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