After hitting a six-month high earlier in the week, sterling took a tumble yesterday against the euro, falling by close to 1% from its highest point in the week between Wednesday morning and Thursday.
The backdrop to GBP/EUR’s rocky week was an endless stream of the highest-level data – employment and earnings, inflation, GDP and finally this morning retail sales.
The biggest news was that the UK has been in a “technical” recession, two consecutive quarters of negative economic growth. GDP (Gross Domestic Product) fell by 0.3% in the quarter, taking it to a fall of 0.2% over the year. Although only a mild recession, so far, the news is a blow to the Prime Minister’s promise to “grow the economy”.
Across the Atlantic there has been plenty for the markets to chew on too, with inflation rising slightly to 3.1% and, perhaps not coincidentally, retail sales falling by 0.8% – far more than expected.
This morning we had a reading that showed UK retail sales climbed by 3.4% in January, well above expectations of 1.5%.
Despite the recession, two of the Bank of England’s more hawkish interest rate setters hit the airwaves to say that inflation has still not fallen enough. Megan Greene said that signs of inflation falling were encouraging, but: “I would need to see further evidence that inflation persistence is less embedded than previously feared before I would consider voting to loosen policy.”
Meanwhile Catherine Mann said she was unsurprised by news of the recession and that things would pick up: “I always had viewed the second half of the year to be a soft patch. And so in my view, the data are just confirming something that I already knew.”
One business flying high is Airbus, whose profits rose by 4% to €5.8bn with the delivery of 800 aircraft, possibly benefiting from Boeing’s problems with the 737 Max.
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