Sterling climbed to its strongest point against the euro for a week over the course of yesterday, and returned close to its best position for a year against the US dollar.
It will have been an interesting morning for central bankers so far, as early indications are that inflation has increased in several European economies. On the plus side, so has GDP, ahead of expectations in Spain, France and Italy. However, data just out shows that the German economy shrank last year by 0.1%.
The big event of the yesterday was the seriously disappointing result for quarterly US GDP, which showed that the US economy grew by just 1.1% in the year to the end of the first quarter of 2023. That’s a sharp deceleration from the 2.6% recorded in the year to the end of December, and barely half of the predicted growth.
The blame is being firmly placed on the US Federal Reserve’s aggressive interest-rate raising policy of last year, hitting business investment and housing. Also negative for the nation at large, but not necessarily for the dollar, the core price index for personal consumption accelerated ahead of expectations. On the other hand, there was positive news elsewhere in the economy, with Americans spending 3.7% more over the year, nearly four times better than the previous quarter’s increase.
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There is a mass of data coming out this morning from Europe’s biggest economies. This morning so far we have heard that French and Spanish GDP has increased to an annual rate of 0.8% and 3.8% respectively. On the negative side, French inflation has increased to 5.9% and Spanish to 4.1%. German and Italian data will be out shortly.
In business news, the UK government has removed the so-called ‘sunset clause’ that would have automatically removed all EU law from the UK statute books by the end of 2023. The decision by business secretary Kemi Badenoch will be welcomed by much of UK business and other groups, while being denounced by Conservative Party Eurosceptics.
The tit for tat between Microsoft and the British government continued, following the tech giant’s president Brad Smith complaining that the EU is now more attractive for business, as a key merger was banned by UK regulators. PM Rishi Sunak’s spokesperson pointed out that: “Last year the UK became the third country in the world to have a tech sector valued at one trillion dollars (£802bn)… the first in Europe by some distance.”
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