The pound strengthened a little yesterday, gaining around a quarter of a percent on the euro and US dollar, to its highest point against the euro for a week.
It’s all revving up in the starting grid for which central bank will be the first to cut interest rates, with the betting now on the European Central Bank (ECB) to beat the Federal Reserve.
We will hear a new inflation figure for the USA this afternoon, but with core inflation expected to be around 3.8% amid a resilient labour market, America’s economy seems in little need of a boost from the Fed.
In the eurozone on the other hand, core inflation is down to 2.9% and the economy showing no growth at all. It’s unlikely that anything will change from the ECB’s decision tomorrow lunchtime, but the markets may well move anyway based on comments from the leading bankers.
In the UK we will start getting high level data again on Friday, with our inflation data next Wednesday.
So, this long period of stalemate for exchange rates while inflation is beaten out of the system could end with a bang. And like the end of the ‘phoney war’ in the spring of 1940, you won’t want to be caught out in the wrong place when it does.
To fix your exchange rate at this level 3% stronger against the euro than the average of the past five years, simply call your account manager on 020 7898 0541.
