Sterling gained around 1% against the US dollar yesterday, hitting its highest level since March 2022 and 5% above its average over the past five years. There were similar gains against other major rivals but against the euro it was more muted at about 0.25% over the course of the day.
The main reasons were, from the UK side, better than expected GDP results, which combined with a big increase in wages in the past year, as announced on Tuesday, supports the idea that there will be more interest rate rises.
The economy shrank by 0.1% in June, when a drop of 0.3% had been expected, taking the annualised figure to negative growth of 0.4%. The extra public holiday for the King’s coronation was a contributory factor.
A very different picture in the USA, where June’s inflation figure of 3%, along with core inflation finally dropping too, suggests that the US Federal Reserve can, after all, rein back on its interest rate rises. One more hike is now predicted from the Fed rather than two, and this hit the dollar severely.
It was good news for stocks and shares though, with the promise of less pain for borrowers sending the FTSE to its biggest one-day jump of 2023 on Wednesday, and a smaller rise yesterday.
One commodity sure to rise in price is olive oil, with Europe’s heat and drought sending the price of olive oil from €4 per kilogram in September to €7 today. A bottle of olive oil in the UK has already risen by 47% in the year to May, and more increases are expected.
In business news, Hollywood actors are set to join writers in strike action in the US, over the use of artificial intelligence (AI) in TV and films.
Less glamorously but also based on new technology taking jobs, next week sees new strike action on UK railways and underground from Monday.
In the public sector, Prime Minister Rishi Sunak announced yesterday that NHS and other public sector staff would receive 5 to 7% pay increases this year – his “final offer”. This looks likely to be accepted by teachers but not by doctors.
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