Sterling climbed against both the euro and the US dollar in early trading this morning.
Despite some ups and downs, the pound continues to trend broadly towards the highs it set in the summer against the euro. For GBP/USD, it’s been a case of the less said the better with the pair now below the level it started the year and a good 8% weaker than its September high.
It’s a salutary warning of what could happen to GBP/EUR if the wind turns direction on the European economy, still very much in the doldrums. However, there is no sign of that this morning. Consumer confidence in France fell to its lowest since June as consumers grew more pessimistic about their financial outlook and standard of living, and yesterday German business confidence was even further down.
It’s not hard to see why business is worried. Donald Trump was up to his old tariff tricks again yesterday, threatening neighbours Mexico and Canada with even higher tariffs on “day one” of his term due to various perceived transgressions.
Deputy Bank of England governor Clare Lombardelli this morning said that the cost of any US tariffs would hit the British economy hard. Should Trump level tariffs on British goods, Lombardelli predicted that long-term productivity would be hit by increased friction and barriers to growth.
Ford has announced it is axing 4,000 jobs in Europe, leaving many wondering if the future of the industry as a whole is in question.
Geopolitically, however, at least there is hope on one front. Israel’s cabinet last night approved a ceasefire (designed to be permanent, according to Joe Biden) with Hezbollah in Lebanon.
Also yesterday, minutes from the Federal Reserve’s monetary policy committee (FOMC) showed growing confidence that inflation was falling under control, although this afternoon’s line-up of GDP and core PCE price increases pose a threat to the US dollar.
It’s a complicated and volatile world right now for currencies and as we have seen from GBP/USD, your exchange rate can lose bigly. If you are committed to a major transaction overseas, talk to your account manager about fixing your rate – which for GBP/EUR is close to a 2½ year high. You can reach them on 020 7898 0541.
