It was a day of two halves for sterling yesterday as recent losses were reversed in the afternoon. There was no particularly obvious reason for sterling to strengthen, which was almost across on the board, although against the euro the pound continues to benefit from political and financial troubles in France.
On the data front it’s been slim pickings for anything powerful enough to move the currency markets. There was some news on the UK housing market yesterday, with the Halifax recording a drop in UK house prices of 0.3% last month. But there was also news that mortgage rates in the UK have reached their lowest since early 2023, which may start to perk things up.
It’s been a period of relative stability for the pound, with minimal movement for GBP/EUR since the beginning of July, and no trend emerging for GBP/USD since May. Will that equilibrium continue into 2026? See what the experts say in our new Quarterly Forecast, out tomorrow.
Filling the vacuum as we await more high-profile data mid-month have been various central bankers in the US and Europe.
‘Hawkish’ comments on inflation from a member of the US interest-rate setting committee, the FOMC, helped to strengthen the dollar yesterday. Jeff Schmid, from Kansas, insisted that interest rates must stay high to see off inflation. More members of that committee – under serious pressure to cut the costs of borrowing by the Trump administration – will be talking publicly today, as will the Bank of England’s own chief economist, Huw Pill. He tends to be quite hawkish too, so any signs that he is tending towards interest rate cutting could damage sterling.
To avoid that risk, and to be ready for when the current stability ends, please contact your account manager to discuss protecting any large international payments with a forward contract, on 020 8003 4915.
Also in the US, there was evidence of falling optimism among consumers as the RCM/TIPP Economic Optimism Index declined to its weakest since May, just as we head to the Christmas shopping season. There is good and bad news for shoppers today, depending on your gift-giving profile, with gold hitting over $4,000 per ounce for the first time ever, but cocoa at its lowest for nearly two years.
In business news, supporting ‘the Availability Heuristic’ in marketing, in this case making it impossible to avoid tripping over your product littering the streets, Lime bikes have reported a 75% rise in turnover in the UK, to £111million. Profits, however, are down by 40%.
