The currency markets were kept guessing last week by a constant supply of the highest level economic data, after which we are left really none the wiser on how the UK economy is doing.
Yes, we are in a technical recession, but people are still spending well in the shops. Earnings are down, but still way ahead of inflation, which is itself sort of not falling (remaining at 4%) but also sort of down, on expectations of a small rise last month.
Too much information? Sterling responded, not unreasonably, by barely moving, overall, and remains precisely where we were last Monday. Except that it had almost reached an 18-month high and is still 4% stronger than this time last year against the euro.
So, to fix that rate for the next year or so, do please call your trader on 020 8108 5163.
What could shift the dials this week? It’s certainly a quieter week on the data front, with only Services PMI coming up on Thursday, although this is one of the biggest six or so data events of the month, so well worth keeping an eye on.
But economic data generally plays second fiddle to political events when it comes to sharp shifts in currency. Hence the biggest recent movements in sterling – with very serious effects for those committed to a currency transaction – have been due to the war in Ukraine, pandemic and elections wins and losses. Indeed one of the largest gains in sterling in recent years was four years ago, when Boris Johnson sacked his chancellor and put the unknown Rishi Sunak in as replacement and the pound hit a four year high. Don’t fall prey to ‘optimism bias’ – such events can go the other way at any time, and often do, especially when exchange rates are at stake.
Changes usually come out of nowhere, which is why we always advise a safety-first approach.
One other thing to mention, on Friday evening Smart Group won Finance Business of the Year at the West London Business Awards. This is something we are especially proud of given the size of the West London economy and the stiff competition.
