Sterling held onto most of its recent gain against the euro yesterday, maintaining a position not far its best in recent years and nearly 2.5% up on last year. Against the US dollar, the pound has gained close to 2% over the past two days.
The pound has been benefitting from a view that the UK may escape US import tariffs, given the fact that the UK and US more or less have a trade balance. The pound therefore offers a safer bet than currencies of countries or blocs about to enter a trade war.
One other factor helping sterling is the idea that prime minister Starmer is aiming for closer ties with Europe, as evidenced by his attending a meeting of EU leaders this week.
The big event this week is the interest rate decision tomorrow from the Bank of England (BoE). An interest rate cut is widely expected, but the critical factor for the markets will be whether it looks like the start of a programme of cutting – like the European Central Bank – or a more cautious approach like the US Federal Reserve.
Sterling’s recovery against the dollar was further helped by a disappointing JOLTs job openings reading in the US, falling to a three-month low of 7.6million new job openings, down from 8million last month.
In business news, some of the first job losses arising from real or threatened Trump tariffs against Europe have been announced, with beauty firm Estee Lauder cutting as many as 7,000 jobs. A company spokesperson blamed “currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues.”
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