The pound and the euro are both on steadier ground this morning, and the reason is the same on either side of the Channel. A batch of business surveys published yesterday showed British and European companies growing again after a soft spring.
Britain’s turn was the sharper one. Services firms, which cover everything from accountancy and law to restaurants and hotels, returned to growth in July after two months of decline, and at a faster pace than first estimated. Confidence among those businesses reached a five-month high.
The eurozone told a similar story. Activity across the bloc grew for the first time since March, helped by a services sector running at its best in five months. Germany, the weak spot for most of the past two years, was among the improvers.
America went the other way. Private-sector hiring slowed to its weakest in months, and a survey of American services companies showed firms shedding staff while still putting their prices up. That is an uncomfortable pairing for a central bank trying to work out whether inflation has been beaten.
Borrowing costs have been drifting down as well. The oil price has fallen about 10 per cent this week on hopes of a deal to reopen the Strait of Hormuz. That Gulf shipping lane normally carries a fifth of the world’s oil and has been shut since February. Tehran says any agreement is delayed while American threats continue, so the fall rests on a deal nobody has actually signed.
Which leaves tomorrow. The monthly American employment report is the week’s real test. It arrives with three officials at the US Federal Reserve having already voted last week for higher interest rates. A weak number would settle that argument for a while; a strong one would blow it wide open again.
GBP: Bailey's September question
The Bank of England held interest rates at its last meeting, with three of its nine rate-setters voting for an increase instead. Better survey figures hand those three something to point at when the committee gathers again in September, though betting markets still put the odds of any rise this year at little more than a third. Construction figures and the newly renamed Lloyds house price index arrive this morning, neither of which usually troubles the exchanges for long.
GBP/USD: the past year
EUR: Frankfurt in no hurry
The European Central Bank raised interest rates in June for the first time since 2023, then left them alone in July. Stronger growth figures make a cut look remote and give it room to sit on its hands until September. The bank publishes its economic bulletin this morning, though the fuller account of July's decision does not appear until the end of the month.
GBP/EUR: the past year
USD: Claims before the main event
The dollar has slipped for two sessions as American government borrowing costs fell alongside the oil price. Weekly unemployment claims arrive this afternoon and will be picked over for hints about tomorrow's far more important employment report. Washington has also spent the week buying Japanese yen alongside Tokyo, its first such intervention since 1998, which says something about how uneasy the currency world has become.
USD/GBP: the past year
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