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The euro wilted under pressure yesterday to touch its weakest level since last August.
Both the pound and the US dollar inched close to their strongest level in almost a year against the euro on Tuesday, despite political drama in the UK and painstaking negotiations to end the war in the Middle East.
Rumours swirled that Andy Burnham may yet find challengers along the path to his coronation. Two Labour MPs declined to rule out the possibility that they might stand against him in a leadership contest. Meanwhile, a growing row over who would have the final say over the upcoming military spending plan offered another signal that the path for the pound is far from assured.
The most likely outcome for the UK is still an uncontested Labour leadership process, which would see Andy Burnham take office around 17 July. Several newspapers reported yesterday that he and Starmer held a ‘frosty’ meeting to align on the handover specifics.
It’s easy to see why there’s no love lost between the two. There are suggestions that Burnham would instantly oust the chancellor, Rachel Reeves, a key Starmer ally and defender of the prime minister. In the past, Burnham has criticised what he sees as the government’s obsession with borrowing costs, although a major speech to city bigwigs next week suggests he may soon change his tune.
The UK’s all-important services sector shrank in June, according to S&P Global’s closely watched survey. This month saw the fastest decline in the purchasing manager’s index (PMI) since the start of 2023. The manufacturing sector reported a positive score, although one slightly below last month’s.
Tuesday was a tough day for tech stocks, with multiple indexes suffering something of a rout. Much of this stems from the perception that the Federal Reserve will raise interest rates by September, making it more costly for these spend-happy giants to borrow cash, as well as for normal companies to justify spending big on credits and tokens.
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GBP: Peril ahead
Sterling slipped near a three-month low against the US dollar on Tuesday and is a full two cents weaker than before the Makerfield by-election. There are plenty of risks ahead for anyone with a vested interest in sterling, from Andy Burnham’s path to Downing Street to the speed at which oil supplies get going again.GBP/USD: the past year
EUR: Merz promises pension reform
German chancellor Friedrich Merz vowed yesterday to convince his creaking coalition to adopt the 33 pension reforms suggested by an expert commission. These controversial reforms are intended to boost growth and repair government finances, although some suggestions, such as a link between the retirement age and average life expectancy, could prove highly controversial in Europe’s dominant economy.GBP/EUR: the past year
USD: Strongest in a year
The US dollar index (an aggregate score based on its performance against a basket of currencies) is now at a one-year peak, reflecting confidence in the American economy and the prospect of higher interest rates. Those levels may not last past the summer, particularly if inflation fades quickly.USD/GBP: the past year
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