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There’s been no mistaking the recent direction of travel for the pound against the euro. Having lost close to 4% since the start of summer, the past two weeks have seen GBP/EUR trying and failing to gain lift off. Yesterday was another such day, with a sharp rise and even sharper fall.
The early positivity came off the back of the rise in Gross Domestic Product (GDP). It was only 0.1% in August, but growth is growth.
This week it has all been about the labour markets, with the US dollar then sterling hit by worsening unemployment in their countries. Yesterday it was the turn of Australia, where the highest unemployment results since 2021 saw the Aussie tumble by well over 1% against some pairs. It’s not unemployment per se that the markets are worried about – that’s someone else’s problem – but the risk that those countries’ central banks will cut interest rates to stimulate their economies.
There seems little chance of that in the UK any time soon, where, as the IMF pointed out this week, inflation remains the bogeyman. Inflation will be the focus once again next week, with the latest data coming out on Wednesday. Watch out for sharp currency movements mid-week.
Looking back at Australia for a moment, the other global business story is tension between China and the USA over who is getting the rare earths required for technologies, especially military. This leaves Australia particularly exposed, as a military ally of the USA but a close trading partner of China. A lot of countries are having to pick sides right now, in all sorts of trades, between an unreliable but vengeful USA and whoever they were used to dealing with.
In business news, there is a report that Ferrari are selling fewer cars in the UK now, mainly because the millionaires and non-doms who were buying them are all leaving. With a wealth tax apparently one of Rachel Reeves’ favoured options in the Budget on 26 November, this could be your best chance to pick up a second-hand Ferrari cheap.
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: Markets look to inflation data next week
The gains for sterling were against the various dollars yesterday – with surges against the Australian, Canadian and US dollars. It’s a quiet end to the week for data but the big event of next week is inflation on Wednesday. No respite from the current high levels of inflation is expected by the markets.
GBP/EUR past year
EUR: Positive end to week for euro
It was all green on the charts for the euro yesterday, with large gains on the various sinking dollars. There is a real dearth of data next week, and we have to wait until the Purchasing Managers Index (PMI) on Friday for anything very meaty.
EUR/USD past year
USD: Data shutdown leaves FOMC in the dark
The dollar was down again yesterday, with its weekly losses now at around 1% against the stronger European currencies – CHF, SEK and the euro. There’s a distinct lack of data coming out of the USA right now, due to the government shutdown. This is unfortunate for the Federal Reserve interest rate setting panel, the FOMC, which use that data to make their decision at the end of the month.
USD/GBP past year
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