The pound gained close to 0.40% against the euro yesterday, possibly in reaction to eurozone producer prices which declined 1.5% year-on-year in May, following a downwardly revised 0.9% increase in April. This marks the first decline in producer prices in two years.
The HCOB German services PMI lost momentum last month, coming in at 54.1 in June – the lowest reading in three months. This was a rather disappointing result for the services sector which soared to a 13-month high of 57.2 in May.
Elsewhere in the eurozone, the service sector in Italy and France both reported declines in June. More on that below.
Estate agency Savills reported yesterday that more than 70% of “prime central London” properties sold so far this year have been bought entirely in cash. This fuels concerns that wealthy overseas buyers are snapping up properties in the UK capital at the expense of working Londoners.
US investment bank JP Morgan said its central forecast expects the Bank of England to raise its base rate above 6% before Christmas. This comes following ongoing inflationary pressures that could force the central bank’s hand. JP Morgan continued with a warning that rates could go higher, possibly up to 7% under “some scenarios”.
In the US, investors returned from a national holiday to fresh concerns about global economic health. Yesterday they heard that new orders for manufactured goods increased by 0.3% in May 2023, underperforming against market expectations of 0.8%.
US stocks were mixed yesterday ahead of the Federal Open Market Committee (FOMC) meeting minutes, with the Dow Jones falling around 100 points and the S&P 500 attempting to cut early losses, trading around the flatline.
The FOMC meeting minutes revealed that policymakers at the Federal Reserve expected no change in Bank rate in June, but borrowing costs are expected to climb more quickly than initially predicted. Investors anticipate future rate hikes in July and September.
London share, the FTSE 100 closed 1% lower yesterday, tracking a rather cautious mood from investors amid ongoing concerns about a global economic slowdown.
This afternoon, the focus will be on the US as the ISM services PMI and JOLTs Job Openings figures are expected around 3pm UK time, which may have time to influence the currency market.
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