UK inflation slowed to 3.2% in March, below February’s 3.4% but slightly higher than forecasts of 3.1%. That’s still the lowest headline rate since September 2021. Core inflation meanwhile also fell back to 4.1%.
The pound and the euro continued to cede ground to the US dollar yesterday as stock markets shrank back and jittery investors flocked to the safe haven currency. The threat of crisis in the Middle East loomed large once more with Israel and Iran trading worrying threats of reprisals.
The pound is now down by over three cents against the US dollar compared to last month. GBP/EUR remained stable, while EUR/USD has also lost around 2.5% in value since the middle of March.
Despite the gloom, the German ZEW Economic Sentiment Index shot up to 42.9 this month, beating forecasts of 35.9. In fact, that was the highest score in the survey since prior to the outbreak of war in Ukraine, as analysts expected a stronger European economy and stronger euro.
In a speech last night, Federal reserve chair Jerome Powell warned markets that high inflation may delay interest rate loosening. Powell has more power than most to influence currency markets, so his comments may serve to weaken the US dollar should risk appetite shift towards something more positive.
It looks like it’s just a matter of time before the Japanese government intervenes to prop up the yen. The Japanese yen continues to circle around its lowest against the US dollar in 30 years, prompting assurances from numerous government officials that they would not let the currency slide too far.
Elsewhere, the International Monetary Fund (IMF) forecast that the US economy would grow at twice the rate of the rest of the G7 this year. Analysts predicted that US GDP would climb by 2.7% in 2024, more than double its projected growth of 1.2% for Canada, the next best performer.
In a handy pinch of serendipity that helps to underscore what we always say about risk, less than three weeks into the quarter, the lower end of the GBP/USD range forecast by seven of the world’s preeminent banks has already been breached. That just goes to show that when it comes to your money, it’s better to be safe than sorry.
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.
