Sterling starts the week close to its recent long-term highs against the euro and 4.5% stronger than a year ago. After dropping some 7% since September, GBP/USD appears to have stabilised a little, but is back to where it was this week in 2023.
With exchange rates moving so rapidly and with so much uncertainty politically and economically right now, anyone committed to a large overseas transaction should consider locking in a rate that enables them to fulfil their plans. Speak to your account manager on 020 8108 5163.
The big picture from data in the UK last week was of a clear pre- and post-budget split. Retail sales before the budget sank by 0.7% but consumer confidence rose sharply post-budget. Meanwhile the business community clearly sees the budget exceptionally unfavourably. The Purchasing Managers’ Index (PMI) dropped like a stone, as bosses viewed the rise in national Insurance payments and cancelled hiring plans. Services PMI is at its lowest for a year at 50, well below the anticipated 52.
Another threat is the potential rise in inflation and, with it, higher interest rates (or at least higher for longer). Shares in the UK’s six biggest housebuilders have fallen by 18% since the budget.
European business is equally subdued as it considers potential tariffs from the US following the presidential election. Almost all the main eurozone economies recorded contracting PMI. French services PMI, for example, fell from 49.2 last month to 45.7 this month.
So, as Rachel Reeves continues having to defend her budget, is there any good news to report from it? Yes! British people spending at least ten years of their retirement overseas could avoid a chunk of inheritance tax (IHT). Changes in the ‘non-dom’ rules mean that if you spend ten years overseas you will no longer face 40% IHT on your global wealth. If you are considering moving overseas, check out Smart Currency’s partner, Your Overseas Home. Could this be the best new IHT tactic now that farmland is no longer the opportunity it was?
It’s not a busy week for data, but tomorrow there will be more reports from the CBI and there is data surrounding the property market at the end of the week, including house prices and mortgage numbers.
It could be the comments from interest rate setters that most move the market, however. In case of large market movements, watch out for our Rate Alerts, but for peace of mind and up-to-the-minute news, nothing beats a quick chat with your account manager.
