The pound’s roughly 1.3% surge against the euro this week takes it to more than 2.5% stronger. It is all predicated on inflation data showing that the Bank of England must continue raising interest rates to beat inflation while the ECB can ease off.
The same scenario is in play between GBP and USD, and yesterday the pound recovered around all of the losses from midweek and more, to be placed at its strongest since early May and 5% stronger than the start of 2023.
Yesterday’s manufacturing PMI was a little better than expected, while mortgage lending dropped off a cliff, declining by £1.4bn when a rise of £0.3bn had been expected by the markets. Should the markets have been surprised, given the rises in interest rates?
There is no major data today and not a great deal next week, although final readings for services and composite PMI could be interesting, and householders will be looking at the Halifax House Price Index on Wednesday. There is some evidence that housing is the first market to be hit by interest rate changes.
GBP/EUR past year
