The Bank of England’s Catherine Mann yesterday cautioned that markets were becoming “too complacent” about the outlook for interest rate cuts this year. Mann, who recently voted to hold rates at 5.25%, said that too many cuts had been priced in, an apparent split from governor Andrew Bailey who last week labelled the prospect of three cuts in 2024 “reasonable”.
“Wage dynamics in the UK are stronger and more persistent than the wage dynamics in either the US or the euro area,” she said in a speech on Tuesday. That makes it unlikely that the BoE will beat the Federal Reserve in the race to cut rates, according to Mann, although whether that’s a view shared by Andrew Bailey remains in question.
European currencies were relatively unmoved by US data yesterday, as improving sentiment in broader markets helped suppress appetite for the US dollar. The pound lost around 0.2% to the dollar and was unchanged against the euro. EUR/USD was down by 0.1%, almost too marginal to mention.
US durable goods orders came in hotter than expected in February. Orders grew by 1.4% month-on-month, beating forecasts of 0.4% and well above January’s 6.9% contraction. However, this did not have as big of an impact on the pound and the euro as many thought it might.
The German Gfk Consumer Climate Index edged up to -27.4 in the latest survey, a slightly improved figure from last month’s -28.8 and beating forecasts of -27.9. This is the highest score of the year so far, boosted by modest uplifts in income expectations and economic prospects.
UK grocery inflation has fallen to its lowest level since before the Ukraine war. Grocery prices increased by 4.5% in the four weeks to March 17, down from 5.3% last month and the lowest monthly rise since 2022, according to sector data.
France’s budget deficit widened by far more than expected during 2023, hitting 5.6% against forecasts of 4.9%. The French government explained that this was primarily the result of lower inflation providing lower tax revenues. However, finance minister Buno Le Maire still sounded a “collective wake-up call” on public spending.
Lastly, please keep in mind we’ll be closed on Good Friday (29th March) and Easter Monday (1st April). UK markets aren’t trading but some others are, so make sure to lock in a rate before the bank holidays and eliminate the risk to your budget.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 7898 0541 to get started.
