Currency Note

Government vows to get tough on ‘profiteers’

By Alex Bennett July 4th, 2023

Sterling bobbed and weaved and ultimately ended up where it started yesterday in what looks like being a quiet week for data.

It’s a purchasing managers’ index (PMI) heavy week, with readings across Europe and the US, and yesterday’s manufacturing PMI was disappointing in both the USA and Germany.

While interest rate rises have been boosting the pound lately, MPs complained yesterday, once again, at how ‘measly’ the banks were being in passing those rates on to savers. The Treasury Select Committee said that banks were “failing in their duty” to encourage saving, and said “The time for action is now”.

Similarly, the UK government also said it would change the law to make fuel retailers provide up-to-date information so that car owners can find the best deal locally. “Some fuel retailers have been using motorists as cash cows – they jacked up their prices when fuel costs rocketed but failed to pass on savings now costs have fallen,” said energy secretary Grant Shapps. Prices “shoot up like a rocket when oil prices rise but fall like a feather when they drop”, said one MP.

In the business news, Facebook’s parent company Meta is launching a rival to Twitter. ‘Threads’ will launch on Thursday. Bahrain’s sovereign wealth fund signed a deal to invest $1.3bn in the UK. And Brightline, a transport group, is refusing to pay $250million in royalty fees to Virgin Group because it says that Sir Richard Branson damaged the brand, in being a “tax avoider” while requesting a government handout during Covid.

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GBP: Pound stays in positive mode

Sterling moved up against the US dollar and yen yesterday while slipping marginally against the euro.

There isn’t a great deal of data to excite the markets today, but tomorrow sees final results for services PMI, which thus far have remained resilient, at 55.2 last month. That may well fall tomorrow, but new car sales are expected to pick up.

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EUR: Euro picks up steam

A positive day for the euro saw wide-ranging if modest gains against all major rivals.

There were final results for manufacturing PMI across the eurozone, with the stand outs being Germany’s falling to 40.6, its lowest since the pandemic (as was the US’s), but French and Italian being better than expected.

Today there’s just been data on employment Spain, with a drop of over 50,000 taking it to the lowest level for 15 years. This comes despite the steep drop in inflation.

USD: Markets await jobs data

Yesterday’s ISM Manufacturing PMI was disappointing, at 46, against an expectation of 47, representing the fastest fall in the sector since May 2020. However it was a quiet day on the markets overall, with little currency movement.

That may not last. While the markets are closed today for Independence Day celebrations, tomorrow sees the publication of the minutes of the recent interest rate decision from the Fed’s FOMC, and on Thursday we’ll get the first of the month’s important employment datasets with JOLTs Job Openings.

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