This morning, the pound shot up by nearly half a cent against the euro and the US dollar.
To take advantage of this gain, which took GBP/EUR close to its highest rate for nearly two years, call your account manager on 020 7898 0541. They can fix today’s excellent rate for the year or more ahead.
The cause of sterling’s boost was not so much the UK’s headline rate of inflation falling to 2.3% in the year to the end of April (a drop from 3.2% in March and the lowest since July 2021) but the fact that it didn’t fall further in key sections of the economy. While the headline rate was driven down by falling gas prices, the price of services rose by 5.5%. Hence, core inflation, the measure with the more volatile energy and food taken out, is still at 3.9% – almost double the Bank of England’s target of 2%.
The chance of a June interest rate cut from the Bank of England is now judged to be less than 50%, which perked up the money markets and sent GBP/EUR close to a near-two year high and well over 1% stronger than last month..
This is far from the end of potentially market disrupting data this week. Tomorrow there will be the Purchasing Managers’ Index (PMI) and on Friday there is Gfk Consumer Confidence and also Retail Sales for the UK.
There will also be comments from members of the BoE’s nine-member interest rate setting panel. It’s always possible that their comments can undercut the impact of today’s data and send the pound down again.
