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A busy day on the currency markets yesterday saw the pound climb to a three-year high against the US dollar and the eurozone get a ninth interest rate cut in two years.
At lunchtime the European Central Bank (ECB) cut rates by a quarter point to 2%, less than half that of the UK and USA. ECB president Christine Lagarde was forced to refute rumours that she is soon to leave her post.
If only US Federal Reserve chair Jerome Powell would leave his, is the view of President Trump, as the data suggesting a worsening economic picture in the USA increases, with jobless claims at their highest for six months but no sign that the Fed will follow the ECB to make borrowing cheaper.
Speaking of worsening situations, analysts at investment bank Morgan Stanley have warned that the pound could soon sink dramatically against the euro due to increasing worries over UK debt. While it would take a heart of stone not to be enjoying the Trump-Musk feud, ostensibly over the size of US debt, Morgan Stanley’s worry is that governments like the US, UK and Germany piling on debt will end in a crisis of confidence in a repeat of the Truss-mini-Budget debacle, but more so.
There is no sign of that happening now. The pound to euro rate has been stable at its current rate for over three weeks. However, it will be challenged by two weeks of data leading up to the Bank of England’s interest rate decision on 19 June. That all starts with employment and earnings data on Tuesday, then economic growth (or lack of it) with gross domestic product (GDP) on Thursday.
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: Pound climbs further against dollar
Another positive day for GBP/USD saw a fresh three-year high and a distinctly choppy performance against the euro. We are coming into a tricky period for the pound, with data coming out thick and fast over the next few days. It starts with unemployment and earnings on Tuesday.
GBP/USD past year
EUR: ECB cuts again
The interest rate cut saw sharp rises for the single currency against ‘safe haven’ currencies such as the yen and Swiss franc, while falling fractionally against the commodity-backed ones like the Aussie dollar and Norwegian krone. Coming out shortly, GDP and employment data.
EUR/USD past year
USD: Markets wait for employment numbers
All in all it was a relatively quiet day for the dollar. Will that last Non-farm Payrolls coming out at 12.30 UK time? Trump’s war of words against Federal Reserve chair Powell will continue if the data continues to suggest a recession is coming.
USD/GBP past year
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