Sterling recovered to its strongest position for six weeks against the euro yesterday, while maintaining its strength against the US dollar, following better than expected economic results.
Gross Domestic Product (GDP) grew by 0.7% in the first quarter of 2025, a strong acceleration from the back end of last year and powered by the UK services sector. It means that the UK tops the G7 growth table, as the Prime Minister was quick to point out. The caveat is that these are preliminary results, subject to change, and in any case come before the full impact of the trade war. The former boss of JP Morgan, Jamie Dimon, warned that this doesn’t mean that the UK will avoid a tariff-caused recession.
Hence the pound could easily wilt as we come into the summer months.
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Also in yesterday’s results, GDP in the eurozone grew by 0.3%, also above expectations, while a final result for French inflation found it was higher than preliminary figures, rising by 0.6% in April. None of this particularly supports calls for an ECB interest rate cut next month.
There was interesting data from the US too, where the numbers were affected by foreign firms getting exports into the US before the tariffs came in, causing GDP to contract slightly. US consumers were cutting back on spending, and retail sales fell back from 1.7% growth in March to just 0.1% in April. American Producer Price Inflation (PPI) fell last month by 0.5%, the sharpest drop since the start of the pandemic in April 2020.
Overall, it was the safe-haven currencies the Japanese yen and Swiss franc in the ascendancy as a ‘risk off’ mood prevailed and big investors sought out less risky assets
In business news, the UK health food retailer Holland & Barrett has thanked weight loss drugs like Ozempic for boosting its food sales by 34% year-on-year.
The cuts in interest rates have come too late for more and more UK householders. The Ministry of Justice released figures that show mortgage repossession claims up by 31% and repossessions by bailiffs up by 42% at the start of 2025 compared to early 2024.
Economics can play havoc with people’s lives, which is why at Smart Currency we advocate a risk-management approach. Please call your account manager to reduce your exposure to the vagaries of the money markets.
