It was a busy day on the currency markets. There were rises for sterling in the morning, with the pound-to-euro rate hitting its best since the beginning of July.
Then the Producer Price Inflation (PPI) data for the US came in and the sharpest rise for over three years sent the US dollar skywards.
With the UK chancellor Rachel Reeves requiring growth above all, Gross Domestic Product (GDP) rising by 0.4% in June – far ahead of expectations – was just what the doctor ordered and the pound responded in kind, extending its weekly gains this week close to 1%.
Those GDP gains were despite goods exports to the USA falling by 13.5% over the past quarter.
The pound has gained well over 10% since the start of the year against the US dollar, indeed close to 4% in two weeks, but it was the dollar’s day yesterday following the PPI data release. It’s some weeks until the US Federal Reserve’s next interest rate decision, but the odds of a significant 50 basis point cut were themselves cut as the news came in.
Back in the UK, and the chancellor would also have been cheered by news that the supposed exit of UK millionaires, taxed out of the country, may have been overplayed. The number of non-doms leaving – predicted to be around 25% by the HMRC and already factored into her budget sums – has not risen significantly since Labour came to power a year ago. Even so, 25% is a large number.
One number either going in the right or wrong direction depending on your point of view (and possibly your age), was the UK Residential Market Survey from RICS yesterday. At minus 13, this was the most pessimistic reading of the UK housing market for at least a year.
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