Sterling recovered strongly over the course of yesterday, gaining around 0.75% against the US, Canadian and Australian dollars and half of that against the euro.
That has been boosted further this morning by news that the economy grew by 0.3% between December and January, supported in particular by the services sector. GDP was ahead of expectations, although output remains 0.2% below February 2020, the month before the pandemic hit. Since Wednesday GBP/USD has regained well over 1%.
“The main drivers of January’s growth were the return of children to classrooms, following unusually high absences in the run-up to Christmas, the Premier League clubs returned to a full schedule after the end of the World Cup and private health providers also had a strong month,” said Darren Morgan, ONS director of economic statistics.
With the Budget next Friday, the Chancellor can make plans based on a stronger economy than expected.
However, the FTSE has been hit by a sell off in US bank stocks as investors worry that banks are over-invested in US Treasury bonds. The drop in share price has spread to European banks too.
Also in the US, President Biden has announced swingeing tax rises on high earners. He pointed out that when he took office there were “650 billionaires in America. Now there are over a thousand” and the average federal tax they pay is 3%.
In other economic news, house prices remain on a downward trajectory, still hamstrung by rising borrowing costs, but are stabilising, according to RICS’ surveyors.
If you’re looking to purchase property overseas, where prices continue to rise in many countries, don’t forget to get your e-ticket to Your Overseas Home’s virtual property event on Saturday 25th March. It’s a day for overseas home buyers to get help, advice and trusted connections, sponsored by Smart Currency Exchange.
In China, Xi Jinping was confirmed as president, to no-one’s surprise, for an unprecedented third term.
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.
