Sterling has remained strong this week, certainly relative to the first few months of 2023, against both the euro and US dollar.
Bad economic news broke out all over the Western world this week, with the eurozone in recession, American unemployment rising and British house prices falling at an annual rate for the first time since 2012. The British Chambers of Commerce have warned that the UK could still head into recession as inflation and high interest rates continue to bite.
The UK government warned, in so many words, that the high street banks should stop ripping off older, loyal customers. Parliament’s Treasury Select Committee noted that while interest rates have been 4% since February, the big four retail banks are still offering a “measly” 0.7% to 1.35% on easy access savings accounts. Chair of the committee Harriet Baldwin MP, added: “We remain concerned that the loyalty penalty is especially prominent for elderly and vulnerable customers who may still rely on high street bank branches.”
For exchange rates, it was the unexpectedly high rise in US unemployment that dominated the market, with the dollar weakening all round as the markets saw the likelihood of a dovish interest rate decision from the Federal Reserve next week.
Economic data wasn’t all bad, however. In the UK, new car sales were up by nearly 17% year on year, S&P services, composite and manufacturing PMI was all revised upwards and all remain firmly in the positive 50+ position (unlike some countries) and RICS surveyors were a little less pessimistic than they had been about the UK property market.
On a visit to Washington DC, British Prime Minister Rishi Sunak and President Biden unveiled an “Atlantic declaration” to increase UK-US ties. As well as working together on regulating AI and in defence and nuclear energy, the agreement is intended to protect the western world’s supplies of critical minerals used in, for example, electric car batteries, and cut China out of the supply chain. While the declaration is well short of a trade deal, there is planned to be a “data bridge” which could cut red tape for exporters, and the start of a scheme for mutual recognition of qualifications for engineers and accountants.
Next week is a big one for exchange rates, with interest rate decisions in the USA and eurozone, plus potentially market-moving data from the UK side too.
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