Although the euro started Monday strong thanks to the German election results, by day’s end it was losing ground to sterling and the dollar. The US currency recovered from Friday’s slump to end Monday 0.3% over the euro and 0.2% up on the pound.
The pound started the day trailing both the euro and dollar but regained some of its strength by close of trading, overtaking the euro. Though, that seems to have been driven by a loss of confidence in the euro rather than good news out of the UK.
It will potentially be a turbulent day for the pound as before the markets opened this morning, Ofgem revealed the energy price cap will rise to 6.4% in April, further squeezing household income. A typical household will now pay £1,849 a year on their gas and electricity, up from £1,738.
Another disruptor is incoming data from the CBI (Confederation of British Industry) this afternoon. The organisation is predicted to say that retail sales in the UK dropped again, despite last month’s numbers being the lowest reading in five months.
Monday looked like it would be a bad day for the dollar, as there were further falls for major US stocks and the S&P 500 tracking downward, with Wall Street unsure what impact Trump’s tariffs will have on the economy.
However, Apple also announced a $500 billion investment in its US operations and plans to hire 20,000 more staff in the coming four years. And, with further indications of negotiations over Ukraine and a thawing of the US relationship with Russia, the dollar ended Tuesday up on both the pound and euro.
After rising to a one-month high when markets opened on Monday morning, buoyed by the German election result, the euro fell back as traders recognised the challenge facing the new chancellor. While Friedrich Merz will be able to form a majority, his coalition will be a complex one which may struggle to push through meaningful and much-need changes to the economy.
Despite those challenges, German shares enjoyed gains through the day, with German tank manufacturer Rheinmetall jumping by 6%, perhaps because Merz started Monday saying Europe needed to achieve “independence” from America.
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