A busy day on the currency markets yesterday saw the pound climb to a three-year high against the US dollar and the eurozone get a ninth interest rate cut in two years.
At lunchtime the European Central Bank (ECB) cut rates by a quarter point to 2%, less than half that of the UK and USA. ECB president Christine Lagarde was forced to refute rumours that she is soon to leave her post.
If only US Federal Reserve chair Jerome Powell would leave his, is the view of President Trump, as the data suggesting a worsening economic picture in the USA increases, with jobless claims at their highest for six months but no sign that the Fed will follow the ECB to make borrowing cheaper.
Speaking of worsening situations, analysts at investment bank Morgan Stanley have warned that the pound could soon sink dramatically against the euro due to increasing worries over UK debt. While it would take a heart of stone not to be enjoying the Trump-Musk feud, ostensibly over the size of US debt, Morgan Stanley’s worry is that governments like the US, UK and Germany piling on debt will end in a crisis of confidence in a repeat of the Truss-mini-Budget debacle, but more so.
There is no sign of that happening just yet. The pound to euro rate has been stable at its current rate for over three weeks. However, it will be challenged by two weeks of data leading up to the Bank of England’s interest rate decision on 19 June. That all starts with employment and earnings data on Tuesday, then economic growth (or lack of it) with gross domestic product (GDP) on Thursday.
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