A frantic week for data and monetary policymaking reaches its final day with the pound almost 1% up on this time last week against the euro and US dollar. That takes sterling to its strongest against the US dollar for 11 months and getting close to its strongest against the euro this year.
Yesterday the European Central Bank (ECB) followed the US Federal Reserve in raising its headline interest rate by 0.25%. That takes headline rates to 3.75% in Europe and 5.25% in the US. The current expectation is that the Bank of England will also raise by 0.25% to 4.50% next Thursday.
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ECB president Christine Lagarde yesterday said yesterday that firms were taking advantage of inflation to boost their profit margins, despite food prices hurting the most vulnerable in society.
The pressure of interest rate rises is being felt keenly in the US, where more mid-size regional banks appear to be in trouble.
In politics, early results from yesterday’s local elections in England show large-scale losses for the Conservative Party. If repeated at a general election they indicate that the Labour Party is on course for a majority.
Also in the UK, the mortgage market bounced back in March, with the highest number of mortgage approvals since last October. However, numbers are still some 25% down on March 2022.
There was also good news for the economy with S&P Global/SIPS services PMI being upwardly revised to 55.9, well up on the previous month’s 52.9. This is similar to other PMI data from the eurozone yesterday. The report said: “Business activity growth regained momentum during April, fuelled by the strongest upturn in new orders since March 2022. Resilient demand and rising optimism regarding the business outlook also resulted in a solid increase in employment numbers.” However, unlike Christine Lagarde, the report blames “elevated energy prices and robust pay pressures” for inflation.
The data continues today including one of the US’s most influential monthly releases, non-farm payrolls, at lunchtime.
