Sterling weakened by up to 0.5% against other major currencies yesterday after the Bank of England (BoE) kept interest rates on hold at 5.25% but signalled that they would be coming down soon.
In the meantime, the US dollar was boosted almost across the board by the US Federal Reserve’s more hawkish stance on holding rates where they are.
The BoE’s vote was 7-2 in favour of holding rates. However, much of the Monetary Policy Committee (MPC) tends to vote as a block, and “the policy decision at this meeting was finely balanced”, said the meeting minutes. Hence the assumption is that the MPC will start cutting at its next meeting in six weeks’ time.
Overnight the Gfk Consumer Confidence reading for the UK was at its best since November 2021 at -14. Still negative, but only half as bad as this time last year, as the 2,000-plus consumers surveyed (after the general election was called) registered a more optimistic view of the economy going forward.
This morning Retail Sales for May have come in at 2.9% growth, almost twice as much growth as analysts had predicted and a huge bounce back from the 1.8% decline in April. The 3.5% rise in non-food sales was the biggest since the second lockdown ended in April 2021, with the sharp change to sunnier weather getting the credit.
As this somewhat undercuts the need for interest rate reductions, the news has at least arrested sterling’s decline since yesterday, although for how long?
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.
In politics and the British general election, there was fresh woe for the Tory campaign as several people close to the Prime Minister, including two parliamentary candidates, were questioned by police about betting on the date of the election. “They are stealing the light bulbs on the way out of the building,” said Nigel Farage.
With more still to fight for, it is less than six days to the first US presidential debate. President Biden and Donald Trump will go up against each other on Thursday, still four months to go until the poll, in what many are seeing as a test of whether Biden is mentally fit enough for another four and a half years as president.
