In a hectic day for the markets, the pound dropped against the euro, dropped again, and then gradually recovered to end the day precisely where it began. There was a similarly pleasing symmetry to GBP/USD too but behind the graphs there was some fascinating data that told us plenty about the state of the US and UK economies.
To the UK first, where the economy as measured by Gross Domestic Product (GDP) showed a sharp drop in July, by 0.5%, dragging annual growth back down to zero.
In the US there were no such surprises, but inflation was revealed to have picked up in August by 0.6% to an annualised 3.7%, up from 3.2% in June. The feeling that this could translate to more Federal Reserve interest rate rises knocked US shares, with the Dow losing 100 points. On the other, more positive hand, ‘core inflation’ with more volatile food and fuel removed actually fell, to 4.3%.
It was all a bit quiet from the eurozone yesterday, but that’s set to change at lunchtime today with the European Central Bank (ECB) making its own interest rate decision.
In business news, the big news was the fall of UK GDP, although this was largely blamed on strike action in health and education, while unseasonal rain washed out retail, construction and a fair amount of leisure spending in July.
Also yesterday, four directors and financial controllers from the collapsed cake retailer Patisserie Valerie were charged with fraud, while the accounting firm Deloitte is set to cut as many as 800 jobs in its UK division.
Where economics meets politics, Prime Minister Rishi Sunak recommitted his government to the pension triple lock.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Personal Trader on 020 7898 0541 to get started.
