Last week the economic data turned against sterling, with predictable results. The pound has lost close to 0.75% against the euro over the past week, 2% against the US dollar and somewhere between those two against other major rivals.
Last week ended with GDP data revealing economic performance far below expectations. Quarterly GDP from July to September was cut to growth of just 0.1% (compared to 0.5% the previous quarter) and the economy shrank in September.
That wasn’t all. Unemployment rose sharply, construction orders collapsed to -9.4 and quarterly labour productivity was at its lowest since the same quarter three years ago.
Some analysts blamed the downbeat messaging from the government. While the betting remains against an interest rate cut at the Bank of England’s next meeting on 19 December, it’s less unlikely than it looked before, which will also have weighed on sterling.
The dollar, on the other hand, has been boosted by American business and investors deciding that the re-election of Donald Trump will be good news for them. But economic success from the current administration’s policies has also boosted USD. Jobless claims were well down and one economic optimistic index was at its highest since August 2021, leading to US Federal Reserve chair Jerome Powell to downplay hopes of an interest rate cut at its last meeting of the year.
Coming up this week, the G20 meeting starts today in Brazil, although with the shadow of Trump leading the free world again in two months little may be decided.
Sir Keir Starmer may be pleased to avoid the growing campaign from farmers about inheritance tax, with tens of thousands expected to protest in London this week (despite only a few hundred being affected by the change each year).
There is plenty more UK data coming down the wires this week, starting with inflation on Wednesday.
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