The UK economy grew by 0.6% in the second quarter of 2024. Although economic growth was flat in June, a strong performance from the services sector (particularly scientific research) helped the UK post its second consecutive quarter of growth over 0.5%.
The euro and the pound continue to perform well against the US dollar. GBP/USD trended slightly upwards yesterday. At the same time, EUR/USD reached its highest since January but the pound’s rotten stretch against the euro was extended by another fall of 0.5%.
On Wednesday, UK and US inflation data contributed to a volatile atmosphere in currency markets. Both reads came in lower than forecast, which was a particular drag on the US dollar ahead of the Federal Reserve’s highly anticipated September meeting.
Headline inflation in the US fell to 2.9% in July – the first time it has come in below 3% since March 2021. Meanwhile, core inflation also sank to its lowest since April 2021 at 3.2%.
Reaction in the US was predictably frenzied. Some commentators said that this represented a ‘goldilocks’ report that markets were after. Others were more measured and continued to predict the Fed would lower interest rates more carefully. Morningstar’s chief US economist did say that he predicted rates would be a whole 2% lower in just a year’s time.
Mixed data from the eurozone couldn’t stop the euro’s charge. GDP growth in the second quarter was unchanged at 0.3% in the second quarter of the year, but industrial production fell by 0.1% month-on-month. That marked a disappointing miss against forecasts of 0.9% growth.
Optimistic inflation data helped ensure it was a good day for US and European stock markets. The S&P 500 and the NASDAQ both rose, while the UK’s FTSE 100 recorded its fourth consecutive day of gains.
Japanese prime minister Fumio Kishida has announced he will step down as leader of the ruling party in September. Kishida has struggled with consistently low poll numbers that have only worsened as the Bank of Japan and the Japanese yen sleepwalked into the centre of a storm.
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