January’s headline inflation read in the UK was unchanged from December at 4%, sending the pound down by around 0.4% against the euro and by a third of a per cent against the US dollar. The euro enjoyed a much better time of things on Wednesday, gaining against the pound while regaining around 0.25% against the US dollar.
It’s always a strange one in currency markets when good news for an economy means bad news for its currency. That was the case yesterday, when the UK happily reported lower than expected inflation of 4% in January (unchanged from December) and the pound promptly slumped.
Forecasts had projected the headline figure to push up to 4.2% last month. In fact, month-on-month consumer price inflation (CPI) and core inflation both fell, which sent traders scrambling to the money markets — the financial world’s equivalent of the high street bookies — to bet on the Bank of England cutting interest rates before summer.
In a handy bit of serendipity, Bank of England governor Andrew Bailey happened to be appearing before a committee in parliament today, so we were able to get his take on things. Bailey called the latest figures “good news”, while tempering that giddy assessment with the following: “This week’s data does not really change our view from the February policy decision.” In other words, back off all ye who expect high rates to vanish instantly.
UK house prices fell for the seventh straight month, according to the Office for National Statistics. What’s good for buyers is bad for renters at the moment, and the data showed the price of private rentals increased by a record 6.2% in the 12 months to January.
Eurozone employment rose by 0.3% in the fourth quarter of 2023. That’s now the eleventh consecutive quarter of reduced joblessness in the eurozone, a pretty impressive feat considering all the roadblocks the last few years have thrown up.
It was a quiet day for US data but Wall Street stocks were up to begin Wednesday after some pretty deep losses on Tuesday. The S&P 500 and the tech-heavy Nasdaq were all up in the morning session, while treasury yields were down.
In other news, Prabowo Subianto has claimed victory in the Indonesian presidential elections. Subianto’s election was a controversial one in the world’s fourth most populous nation, with some commentators voicing concerns that he may have received too much support from his predecessor.
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