The pound strengthened by around 0.5% against the euro on New Year’s Eve and has largely held onto those gains, and the reverse is true against the US dollar, where GBP is back close to its weakest since April.
We have just had the Nationwide House Price index, which found that UK house prices climbed by 0.7% on a monthly basis in December. Across the whole of 2024, house prices rose by 4.7%, the fastest annual pace since October 2022.
There remains a dearth of data for the markets to work on, but we will get final PMI (purchasing managers index) readings over the next few days.
With less than three weeks to the inauguration of Trump as US president the many predictions for economies and exchange rates over the next few months have taken on a whole new interest. The FT’s poll of 72 economists found an average prediction of 0.9% growth in the eurozone in 2025, despite expecting tariffs leading to a trade war.
Meanwhile in The Times, 51 economists were polled and the majority predicted that the Bank of England will be forced by weak, zero or negative economic growth to cut interest rates four times in 2025, down to 3.75%.
As the saying goes, economists have predicted eight of the last five recessions, and it is little but guesswork. However, this does go well beyond the two rate cuts priced into sterling exchange rates. If true, this could well spell bad news for the pound.
So, make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 7898 0541 to get started.
