Sterling bounced back against the US dollar and to a lesser extent against most other currencies yesterday, while weakening slightly against a resurgent euro.
GBP/EUR continued to soften, following a clear signal that the Bank of England will be cutting interest rates at its next meeting on 1st August. Several mortgage companies have been offering cheaper mortgage deals already, in anticipation. As Rightmove pointed out yesterday, the average mortgage has risen by 61% since 2019 and the average first-time buyer is now paying £1,075 per month, £667 more than in 2019.
The euro was the clear winner across the board yesterday, strengthening by as much as half a percent against the US dollar, yen and rupee. This followed a disappointing Ifo Business Climate report for Germany, which surprised the markets by declining to 88.6 from 89.3 last month.
In the UK, on the other hand, CBI Industrial Trends Orders were better than expected at -18, their best in three months.
In the UK general election, influential thinktank the Institute for Fiscal Studies (IFS) was scornful of the parties’ manifesto promises, saying the parties had “hidden and ducked” hard economic choices and that whoever won faced a choice of cutting services or raising taxes.
The markets have also been assessing what might be the result of France electing its first far right government since the Second World War, with the would-be next French Prime Minister Jordan Bardella saying he wants a €2bn cut in France’s contribution to the EU.
On the stock exchanges, there has been a sell off of US tech stocks, with the Nasdaq recording its biggest one-day drop in two months. Shares of Invidia dropped by 6.7%, taking it to a valuation more than $500bn less than last week.
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