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The pound fell again against its peers to begin the week.
The pound continued its recent nosedive against the US dollar and the euro yesterday. GBP/USD sank by almost a cent to begin the week, while GBP/EUR lost around 0.5%.
The tone in markets was marginally improved but caution remained the name of the game. Gold fell back from its recent highs in a sign that easing tensions in geopolitics was having an impact, however small, on anxious investors.
It wasn’t all bad news for the UK. Sterling’s losses were the stock market’s gains, as the FTSE 100 index neared record highs, boosted by the growing gap between expectations of UK and US interest rate cuts this year.
The Bank of England’s deputy director Dave Ramsden added fuel to that particular fire last Friday. Ramsden observed that risks of resurgent inflation had receded, and coupled with sluggish retail sales, the pound stared down a sell off as markets became more convinced the Bank would cut faster and deeper than the Fed in 2024.
In fact, the shift in expectations around the Federal Reserve has been so drastic that markets now believe the chance of it raising rates again is around 20%. It was only a few months ago that traders were pricing in six, maybe seven rate cuts this year. Just four months later, that scenario seems fanciful in the extreme.
Thames Water has increased the amount of money it plans to spend on fixing leaks and making debt repayments as part of its attempts to stay afloat. The ailing utility’s plans, which it said would not result in any additional costs to consumers, are still being considered by regulator Offwat.
Tech giant Tesla is expected to post its worst set of financial results in seven years tomorrow. CEO Elon Musk had been expected in India, but Musk cancelled his plans citing “heavy obligations”.
Donald Trump is facing a busy week of ducking in and out of court hearings. Trump has the hush money case on his agenda, as well as a bond hearing and an attempt to convince Supreme Court justices that he has presidential immunity and therefore cannot be prosecuted for his efforts to overturn the previous election.
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 account manager on 020 3918 7255 to get started.
GBP: Excitement builds
Sterling has been tumbling, but the outlook for the UK economy seems to be headed in the right direction. Next month’s GDP figures will confirm if the UK has exited its recession, while markets are now increasingly sure that the Bank will cut rates in the near future.
GBP/USD: the past year
EUR: Debt dynamics
Debt in the euro area decreased to 88.6% of GDP in 2023, the lowest ratio in four years. Analysts had been expecting a greater fall to 88%, but the region remains saddled with several highly leveraged economies, including Greece (161.9%) and Italy (137.3%).
GBP/EUR: the past year
USD: Ukraine bill passes
After months of tussle on Capitol Hill, the US Congress finally passed a bill that will grant more than $60bn in aid to Ukraine. The long-awaited funding is not expected to turn the tide of the war, but it will at least provide relief to Ukraine’s depleted military stockpile.
EUR/USD: the past year
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