Blog


Market Update

The British pound rose against a broadly struggling dollar but fell against a stronger euro as the latest economic data suggested the cost-of-living squeeze had not yet hit demand for staff in the UK.

Data showed Britain’s unemployment rate holding at 3.8% in the three months to May while the number of people in work rose by the most since the middle of 2021.

The drop against the euro is due to that currency’s strength. It rose to its highest against the dollar in almost two weeks on Tuesday on news that European Central Bank (ECB) policymakers would discuss whether to raise interest rates by 25 or 50 points at their meeting on Thursday.

We’re seeing some continuation of dollar downside that we saw on Friday and Monday, and equally today we’re seeing some euro upside, largely on anticipation of the fact that the ECB might hike more than 25 bps.

As well as relative currency moves, politics is a main factor driving sterling.

The race to replace Boris Johnson as British Prime Minister has narrowed to four candidates, led by frontrunners Rishi Sunak and Penny Mordaunt.

The Bank of England (BoE) is struggling against soaring inflation and a cost-of-living crisis, having raised interest rates five times since December as it has tried to halt a surge in inflation from becoming embedded in the economy.

With diverging approaches to fiscal policy, whoever becomes the next prime minister could affect the trajectory of future fiscal policy, although a top central bank official pushed back against this.

Fiscal support is going to imply that BoE will have to tighten monetary policy a bit … aggressively.

A win by Mordaunt could sort of be a game changer for sterling, not so much against the dollar but against other currencies.

Leave a Reply

Your email address will not be published.

What's Going On?

Currencies 4 You Ltd is a company registered in England and Wales (registered no. 06866898). Registered office: Regus House Victory Way Admirals Park, Crossway, Dartford, Kent, DA2 6QD. Currencies 4 You Ltd Payment and Foreign Currency Exchange Services are provided by Currency Cloud Limited and Equals Connect Limited. Currency Cloud Limited. Registered in England No. 06323311. Registered Office: Stewardship Building 1st Floor, 12 Steward Street London E1 6FQ. The Currency Cloud Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 for the issuing of electronic money. FCA registration number: 900199. Payment Services are provided by Equals Connect Limited, registered in England and Wales (registered no. 07131446). Registered Office: Vintners’ Place, 68 Upper Thames St, London, EC4V 3BJ. Equals Connect Limited are authorised by the Financial Conduct Authority to provide payment services (FRN: 671508). | Terms and Conditions | Privacy Statement | Careers