The pound weakened yesterday as a quiet period for data from the UK continued, but the European Central Bank cut its interest rate for the first time since 2019.
Sterling starts the day fractionally down on all major rivals, while the euro has taken the rate drop in its stride, unmoved against the US or Canadian dollars and slightly up on sterling. However, the euro isn’t out of the woods yet, with the European Parliament elections this weekend.
The ECB’s rate cut was well signposted and had been priced into euro exchange rates for some time, so the markets were listening closely to ECB president Christine Lagarde’s comments afterwards. She certainly struck a cautious tone, pointing out that “domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year.”
The ECB followed the Bank of Canada, which cut rates the day before. Attention now turns to the US Federal Reserve, which will make its interest rate decision on Wednesday. Before that, we have Non-Farm Payrolls this afternoon. It will be the second US jobs report of the week, following JOLTS Job Openings which recorded a weakening jobs market in the US.
Things rev up next week for UK data with unemployment and earnings on Monday. There will also be interest in the weekend’s general election polls, to see whether the Conservative’s combative and contested claims on Labour’s “£2,000” tax plans have cut through to the electorate.
We have just heard that house prices fell slightly in May, according to the Halifax. The 0.1% drop in prices still leaves prices 1.5% up over the year.
This morning Labour will be attempting to woo would-be homeowners with a government mortgage guarantee, while the Tories will promise to double the income threshold at which child benefit stops being paid to £120,000.
In business news, the British tech entrepreneur Mike Lynch has been cleared in a fraud trial in California, where he was accused of duping Hewlett-Packard out of billions of dollars. He faced 20 years in prison if found guilty.
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