Tuesday saw another day of climbs for the pound, seeing it end 0.45% up on the dollar and 0.37% on the euro. While the past month has been particularly punishing on sterling, it is now riding high on the dollar, approaching the highs of September 2024.
The big UK news is that UK inflation dropped to 2.6% in March, down from 2.8% the previous month. City forecasts only had it dropping to 2.7%, so the extra dip puts more pressure on the Bank of England to cut interest rates. Especially as, at the start of the year, the Bank had predicted it would be rising to 4% by this time.
During the height of US president Donald Trump’s tariff turmoil, analysts were all-but certain the Bank would cut interest rates when the Monetary Policy Committee next met on 8 May. However, as the pressure eased off, so did the confidence in their prediction. Today’s figures, restoke that urgency.
The dollar fell 0.26% against the euro on Tuesday and more than twice that against the pound. The US stock market made modest gains, thanks to Trump mulling the idea of an automotive industries tariff exemption. Still, as with his temporary electronics tariff exemption, the policy is currently undefined and unscheduled.
This afternoon, some of the early impact of Trump’s tariffs will be revealed in the monthly retail sales data produced by the US Census Bureau. Though, it will only capture the build up to the president’s announcements. Analysts predict a significant increase, from 0.2% growth in February to over 1% in March.
Then, in the evening, chair of the US Federal Reserve Jerome Powell is giving a speech on the current state of the US finances. No fan of Trump and previously resistant to cutting interest rates, the banker is likely to detail what the president’s inconsistent fiscal policy means for future cuts.
The euro, which gained on the dollar but couldn’t keep pace with the pound, was buoyed by the news that Trump is considering an automobile exemption to his tariffs. Germany’s vehicle industry suffers particularly from the current 10% tariff and additional 25% tariff on automobiles.
Later today, Europe will publish its own inflation data, which is also predicted to fall. Though, it is unclear whether the decline would be in line with forecasts or even steeper, like in the UK.
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