It was a strong day for the dollar on Thursday, growing more than 0.5% against the euro and the pound. Sterling was leading on the euro until this morning’s GDP figures revealed the UK economy shrank in May, instead of the small uptick predicted.
Fresh GDP figures show the UK economy shrank by 0.1% in May, instead of following analysts’ predictions of a 0.1% rise. The news has already put a dent in the pound this morning as many of Chancellor Rachel Reeves’ spending plans are pinned on the UK economy growing.
Compared to this time last year, the economy is still 0.7% larger, but some of those gains are down to one off changes, such as April’s increase in stamp duty. Real underlying growth within the economy isn’t showing itself.
Over in the US, despite a slew of tariff announcements in recent days, it looks like the markets are shrugging off fears of a trade war. Stock markets ended on fresh highs as buyers picked up shares in mining companies, a clear sign they’re not worried about Trump’s announced 50% tariff on copper.
Behind the buyers is the TACO mantra – Trump Always Chickens Out. It’s the belief that come August when the tariff is due to kick in, US President Donald Trump will hold back from the full 50% levy.
This flurry of activity sent the dollar up more than 0.5% against the euro and pound. This has been a week of peaks and troughs for the dollar, making it unclear what Friday will bring.
Yesterday brought news that Germany had managed to hit its 2% inflation target, suggesting the EU has indeed managed to get inflation under control. France is due to reveal its own inflation data later this morning, which may continue (or throw a spanner) in the trend.
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