Currency Note

Sterling stages steady recovery

By Alex Bennett August 9th, 2023

Sterling has continued its recovery in early trading this morning, gaining around half a cent against the euro since Monday morning and now slightly ahead of its position last Wednesday. There has been plenty of movement against the US dollar too, but no clear direction.

On the data front, so far this week we’ve seen both house prices and retail sales weakening, though probably a little less than expected by the markets. The big test, however, will be Gross Domestic Product (GDP) for the UK, which we’ll hear in just under 48 hours.

This could easily move exchange rates if it looks as though the savage effects of interest rate rises are not denting people’s willingness to spend and, therefore, maintaining high inflation.

Speaking of which, US inflation data is out tomorrow. It is expected to rise slightly, but again, any surprises could affect currencies. In China the new problem is deflation, with prices falling by 0.3% year on year in July.

In business news, negotiations will restart in the Hollywood film industry, where actors are striking over the use of their faces in AI (artificial intelligence) created productions. Problems also at WeWork, the flexible office-space provider, which has seen memberships drop by 1% and is reportedly struggling to stay afloat as workers return to offices.

Good news for those with Premium Bonds, however, where the rate has increased to 4.65%, its highest for 24 years. Moreover, there will be 90 prizes of £100,000 each month, a rise from just six in May last year.

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 Business Trader on 020 3918 7255 to get started.

GBP: Pound’s upward progess

A mixed day for the pound has taken its overall gains across the past week to as much as 1% against major rivals, most notably the US, Canadian and New Zealand dollars.

On the data front we will shortly hear about UK gilts and this evening the RICS House Price Balance, where even more surveyors are expected to be pessimistic about UK property values in the year ahead.

GBP/USD past year

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EUR: Mixed day as German inflation fall confirmed

The single currency had a generally negative day yesterday but remains up across the week against the US dollar. Germany’s inflation was confirmed at 6.2%, a fall from 6.4% last month.

There will be very little data for the markets to chew on today, but tomorrow we’ll hear Italian inflation, which like the UK’s has been exceptionally high, at 6.4%.

USD: Markets await inflation data

The dollar weakened across the board yesterday, although the losses were pegged at below 0.35%.

A quiet period for US data ends today with inflation being announced at around midday (UK time). Expectations are for a small rise to 3.3% in the headline rate, but with core inflation at a considerably more concerning 4.8%

For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business trader on 020 3918 7255 or your Private Client trader on 020 7898 0541.