After strengthening against the euro yesterday, the pound is weaker this morning and is nearing a yearly low against the dollar.
Inflation continues to be the main cause of sterling’s woes. UK businesses have called for the government to do more to help them, warning that they are on “limited time”.
It’s a similar story in the eurozone, with economists suggesting the economy could enter a recession before the end of the year. Eurozone inflation data, due today, will therefore be eyed closely.
The dollar remains stronger, benefitting from its safe-haven status. Nonetheless, US stocks have seen their worst drop in the first half of a year since 1970 as concerns over inflation and future interest rate hikes cause investors to worry.
Markets now await PMI figures for the US – an important measure of how the economy is faring and the current market conditions.
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GBP: UK businesses “on limited time” amid rising inflation
After strengthening against the euro yesterday, sterling is weaker this morning. Against the dollar, the pound is nearing a yearly low as markets continue to seek safe-haven currencies.
As the UK economy continues to suffer from rising inflation – which is forecast to reach 11% later this year – the director general of the British Chambers of Commerce (BCC), Shevaun Haviland, has warned Chancellor Rishi Sunak that businesses desperately need financial support. “We are on limited time. The government has until the autumn budget to reset, rethink and get their house in order,” he urged.
Today, data for manufacturing PMI will be released. Mortgage approvals and lending figures will also be released.
GBP/USD chart over past year
EUR: Eurozone inflation figures due
The euro has strengthened slightly against the pound but remains weaker against the dollar following poor economic data which has amplified fears of a technical recession.
Along with worse-than-expected retail sales data for Germany, French inflation increased by more than expected, to 5.8% in June. However, the unemployment rate in the eurozone fell to 6.6%, down from 6.7% the month before and better than expected.
Economists have suggested that the eurozone economy could enter a recession before the end of the year.
Today, all eyes will be on eurozone inflation which is expected to have risen from 8.1% to 8.4%. Any surprises could impact the euro.
USD: Dollar strong ahead of PMI figures
After losing a little strength against the euro yesterday, the dollar is once again on the front foot against the euro and the pound as markets await key PMI figures.
Yesterday saw personal income remain unchanged in May, at 0.5%, while personal spending fell to 0.2%, down from 0.6%. Other data releases revealed that the number of Americans filing for unemployment benefits fell last week but was still higher than predictions.
US stocks have seen their worst drop in the first half of a year since 1970 as concerns over inflation rise.