Sterling briefly hit yet another high against the euro yesterday lunchtime, though it didn’t last into the afternoon session. But GBP/EUR remains close to its best since spring 2022 and GBP/USD only marginally off it.
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It was a day of high-level data from the eurozone and the USA. European inflation dropped below expectations to 1.8%, its lowest since March 2021, although core inflation is still above the European Central Bank (ECB) target at 2.7%. Even so, it was the probable cause of the pound’s boost at midday, as the ECB can feel free to make another cut in interest rates to perk up its economy.
In the USA, on the other hand, job openings in August rose by a third of a million from the previous month. Federal Reserve chair Jerome Powell signalled that the next rate cut (on 7 November, the same day as the Bank of England’s) would probably just be a quarter of a per cent, not half as previously thought. The US dollar recovered sharply on the news.
There were reports on boss’s optimism around the world in the manufacturing sector, and there wasn’t much of it to go around in Europe, with manufacturing PMI (Purchasing Managers’ Index) dropping sharply once again in Germany. It also fell in the UK too, a drop in business confidence blamed on the new chancellor’s dire warnings on the economy and reflected in the new Institute of Directors’ Economic Confidence Index, which dropped sharply to its lowest reading since December 2022.
It’s all a bit quiet today on the data front. Tomorrow, we’ll receive final PMI results for services – which is a big part of the UK economy and will be watched closely.
