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Sterling strengthened on Tuesday as stock markets and precious metals marked a recovery in risk appetite.
The pound recorded a positive day against the euro and the US dollar as recent jitters in global financial markets eased across Tuesday.
A rebound for gold and silver after a dramatic sell-off helped steady broader markets, where strong results from the AI sector also lifted the mood (although not for software companies). Overnight, the US government’s partial government shutdown ended after just four days, although the $1.2 trillion agreement still only secures funding for the Department for Homeland Security up to next Friday, setting the scene for another political showdown.
Yesterday proved to be light on economic data after the partial US government shutdown forced the postponement of the JOLTs job update. This afternoon’s services PMI from across the Atlantic will be an interesting one after strong manufacturing output in January.
French consumer price inflation fell to an annualised 0.3% in January, significantly undershooting forecasts ahead of the eurozone’s unified read later this morning.
Staying in France, months of highly politicised wrangling in French parliament have finally yielded a government budget. It was a document that felled two prime ministers, but Sebastian Lecornu (who himself was forced to resign before returning to his post) could eventually claim success thanks to a compromise to suspend plans to increase the retirement age from 62 to 64.
Government borrowing costs climbed in the eurozone and the UK on Tuesday. This was partly the result of recent inflation data, which supported the view that interest rate cuts might be few and far between this year, as well as significantly heightened sovereign spending in Germany’s case.
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GBP: Awaiting direction
There was little action in sterling markets yesterday as traders adopted a wait and see posture ahead of tomorrow’s rate decision. Policymakers seem unlikely to cut, but the real movement will come should the outlook for the year ahead have shifted.
GBP/USD: the past year
EUR: Will others follow France?
Some crucial inflation data should help guide the European Central Bank’s decision on Thursday. If those numbers are anything like those that came out of France yesterday, where headline inflation fell to its lowest since 2020, it seems unlikely rates will be changed.
GBP/EUR: the past year
USD: More cancelled data
A partial government shutdown in the United States led to some key economic data being cancelled this week. This has now been resolved, but we’re still waiting for confirmation of when we’ll get the JOLTs job report and non-farm payrolls data this week. The Bureau for Labor Statistics previously said these would have to wait until it returned to full functionality.
EUR/USD: the past year
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