Sterling bounced back in some style yesterday, gaining around 0.5% against the euro and US dollar. GBP/EUR is still over 1% down on last week but GBP/USD has recovered last week’s losses.
Those factors that led to the pound’s downfall – a dovish Bank of England, fear of US recession and stock market falls – are all being downplayed or reversed now, and more of a risk-on attitude has returned to the markets. This includes buying up the now-cheaper tech stocks, such as Apple which had dropped by 11%.
The stock market recovery was supported by better-than-expected jobs data from the US yesterday, which calmed some recession worries.
Yesterday’s data from the UK included a surprising report from the UK’s chartered surveyors. The RICS House Price Balance dropped to -19, indicating that more surveyors than before expect house prices to drop. This flies in the face of the house price data from the Nationwide and Halifax recently, which showed a recovering housing market. Optimism was further supported by house-builder Persimmon, which says the market has been boosted by large pay rises for key workers such as teachers and doctors.
Meanwhile, there was also a report from the Ministry of Justice showing UK mortgage repossession claims at a five-year high, rising by 24% year on year to 5,343 in the second quarter of 2024. Hardly a surprise given interest rates rising to a 16-year high, and yet repossession claims are still below the levels pre-pandemic.
At the other end of the money-worries scale, Barclays Bank has become the first UK bank to scrap the EU bonus cap. Bankers can now earn bonuses of up to 10 times their salary – compared to a cap of double their salary within the EU.
Also in business news, Disney is reported to be ready to spend $5bn in the UK and Europe, as the company basks in the success of some recent movies Deadpool & Wolverine and Inside Out 2.
However, returning to the currency markets, next week is a busy one for high level data in the UK, with all of those factors that govern interest rate decisions being reported on through the week.
Having seen a significant reversal in the fortunes of sterling this week, 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 account manager on 020 7898 0541 to get started.
