The pound staged a recovery yesterday, gaining close to half a percent against the US dollar and Chinese yuan, and finishing the day slightly up on the euro.
There have been mixed signals on the economy this week from the Purchasing Manager’s Index (PMI) final reports, with Services PMI well above expectations on Wednesday at 49.3, but Construction PMI well below expectations yesterday at 45. That’s the worst it’s been since the early days of the pandemic.
However, the UK was far from being the worst performer even for construction PMI, with the eurozone and Germany in particular well below.
The pound was boosted by a the same generally improving risk sentiment that has dented the dollar index. Also, perhaps, by the deputy governor of the Bank of England (BoE), Ben Broadbent, saying yesterday that it was an “open question” whether interest rates might rise again. With services PMI close to being in positive territory (over 50 indicates expansion) there are rising hopes that a recession can be avoided.
If so, that could be bad news for mortgage holders, with the BoE provoked to keep on applying the interest rate pressure to cool inflation. The result of that has been felt again this morning with the Halifax House Price Index again showing falling prices. However, although property prices fell 0.4% in September this was a marked deceleration in declines from August’s 1.8%, taking the annual drop in prices to 4.7%, similar tp that recorded by the Nationwide on Monday.
In political news, the Labour Party has made a big victory in a by-election in Glasgow, with a 20% swing from the Scottish National Party. It will be a major boost for Labour as it heads into its conference this week. Despite its own conference this week, the Conservative vote fell by 11% and they lost their deposit.
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