Sterling recorded a small daily advance against the euro and a slightly larger one against the US dollar yesterday, a day when Europe’s politicians took aggressive countermeasures against American trade tariffs.
UK prime minister Keir Starmer took a less confrontational position, saying that while he didn’t rule retaliatory tariffs out, these would not be his immediate response. That helped sterling stay out of the fray for the most part and allowed GBP/EUR to strengthen by about 0.3%, still half a cent down from Monday. GBP/USD meanwhile pushed ahead by more than half a cent.
European Central Bank (ECB) president Christine Lagarde said policymakers were unable to guarantee inflation falling to the 2% target amid “exceptionally high” uncertainty. Her words came as the European Union announced tariffs on up to $28bn in American goods.
Yesterday we learned US headline inflation fell to 2.8% in February, a larger fall than the majority of surveyed economists had expected. Core inflation, which omits price rises for more volatile goods, meanwhile fell to its lowest in almost four years. Egg prices – heavily politicised in the election campaign – surged by over 10% month-on-month amid an avian flu outbreak.
The Bank of Canada yesterday voted to cut interest rates from 3% to 2.75%, the third quarter-point cut in as many months. Policymakers noted that economic output had exceeded expectations in recent months, but bumps in the road lay ahead with trade tariffs and the souring relationship with its noisy neighbour.
Representatives from the United States and Russia will meet today to discuss a potential ceasefire to the war in Ukraine. Ukraine’s president, Volodymyr Zelenskyy, said he expected a “strong response” from America should Russia reject the proposed deal.
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