020 7898 0500The pound weakened yesterday against the euro but then thought better of it, as an interest rate hold from the Bank of England (BoE) looks increasingly likely to the markets when the Monetary Policy Committee (MPC) speaks tomorrow.
However, recent votes suggest it is unlikely to speak as one, and there will be much attention paid to how the committee votes and what that means for subsequent decisions this spring and summer.
Against the euro, sterling remains at the upper reaches of where it has been becalmed since – checks the charts… – last July. This remarkable stability was helped yesterday by the Prime Minister escaping a potentially disastrous enquiry on claims that he misled parliament over the Mandelson affair. Friendly words from President Trump on the King’s state visit to Washington also adds to a more relaxed political vibe.
While recent ups and downs against the US dollar have been more pronounced, GBP/USD also remains well above the average of the past year and close to 2% up on where it started the month.
Ahead of the MPC vote tomorrow, a run of recent data has shown the UK economy less bothered by the war in Iran and oil price rise than might be expected. And following falling unemployment last week and a positive mood from business according to PMI surveys, this morning shop price inflation in April was announced as just 1% and not the 1.5% predicted. Source of the data, the British Retail Consortium (BRC), was keen to downplay the good news, saying that retailers were simply limiting price rises to stimulate demand in troubled times: “While we’re yet to see the full force of the Middle East conflict feeding into consumer prices, it will not be long before it begins to,” said BRC Chief Executive Helen Dickinson.
After a run of price rises that have taken it back to $100 per barrel, Brent Crude dropped slightly yesterday. The bigger news was that the UAE has left OPEC, the oil producers’ group that limits the supply and hence the price of oil. If the UAE pumps more oil than before that could cut the price, but only if it can get it past Iran.
For now it’s all eyes on the central banks as US Federal Reserve Chair Jerome Powell bows out.
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GBP: Positive week for sterling ahead of BoE vote
Gains for the pound this week have been modest – all less than 1% – but across the board. While few analysts expect a move on interest rates tomorrow, the voting pattern of the MPC and comments from BoE boss Andrew Bailey could be influential. After a run of high-level data there isn’t much else to impress the markets this week, ahead of the long weekend.
GBP/USD past year
EUR: Euro becalmed ahead of ECB vote
If you appreciated the end-to-end football drama of PSG and Bayern Munich at the heart of Europe last night, imagine recent movements in the euro as the opposite of that. Against the pound and US dollar it’s barely moved this week. That’s despite the ECB facing challenges ahead of its decision on interest rates tomorrow. Consumer Inflation Expectations shot up to 4%, the largest monthly increase since the start of the Ukraine war four years ago, while unemployment rates are on the rise too, and there’s plenty more data to come before tomorrow’s rate decision.
GBP/EUR past year
USD: No drama expected for Powell’s last Fed decision
While the King received a warm welcome in the US, should he have time for any shopping Charles will find the currency with his picture on it stretching close to 2% further than last month. Today could be Jerome Powell’s last meeting as head of the USA Federal Reserve, and he and fellow rate setters look likely to continue their cautious approach on rates, with no change expected.
USD/GBP past year
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