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Sterling came within a whisker of its best level since the summer of 2022 yesterday against the euro, while remaining close to its strongest against the US dollar since last summer.
The impetus for GBP/EUR’s strength came from the other side of the Channel, and European Central Bank (ECB) president Christine Lagarde’s comments after keeping interest rates on hold. The markets are now predicting a rate cut from the ECB as early as April, after Lagarde said: “The disinflation process is at work.”
Elsewhere, data releases showed more disappointment for Germany, with the Ifo Business Climate reading sinking again, when a small rise had been predicted. We have also just had the GfK Consumer Confidence report for Germany which shows a worsening picture at -29.7, even as the UK’s improved to -19. This was a two-year high for the UK.
The pound was already riding high after a boost to services and manufacturing PMI this week, a huge fall in Public Sector Net Borrowing and a rise in car production, which exceeded one million new vehicles in 2023 for the first time since the pandemic.
However, for anyone hoping for an interest rate cut from the Bank of England any time soon, the data offered little hope. The Bank’s next decision is on Thursday, but no change is expected.
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GBP: Pound advances again
The pound has gained around a third of a cent against the euro since this time yesterday, while drifting downwards against most other major currencies.
On Thursday the big event in a relatively light week for data will be the interest rate decision – no change expected – although there will be some housing data. Will the Nationwide show a continued rise in prices?
GBP/USD past year
EUR: Euro slips on rate cut expectations
The single currency slid across the board yesterday following the hold of interest rates and downbeat assessment from Christine Lagarde.
Monday starts quietly in the eurozone data world, but sharpens up on Tuesday with preliminary readings for quarterly GDP on Tuesday across the continent. A negative reading will prove that a shallow technical recession continues.
USD: Dollar gains on euro and pound
A mixed day for the dollar ended positively overall against major rivals.
Later today there will be a reading from the USA on personal income and spending for December.
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