Sterling has weakened again in the past 24 hours, buffeted by a daily assault of negative data on the UK economy.
The pound weakened to a fresh low against the euro, its worst again since November 2023. But there were no bright points for sterling. The day’s losses against the US, Canadian and Aussie dollars were all between 0.25% and 0.75%
Yesterday it was the turn of the Purchasing Managers Index (PMI) which, although in positive territory (at above 50) for the all-important UK services, fell from last month and was below expectations.
If PMI was the business mood, overnight we had the GfK Consumer Confidence reading, which showed a public more worried about their finances. GfK’s spokesperson Neil Bellamy suggested that due to rising inflation and potential tax rises: “some people may be sensing stormy conditions ahead”. A third of householders told GfK that it was “a good time to save” – the highest number since the financial crash in 2007.
But was that reflected in consumers’ actions? We’ve just heard Retail Sales data for the UK in June, which increased by 0.9%. An increase from last month’s huge decline, to be sure, but not as much as the markets had predicted.
The mood against spending has been reflected at all ends of the market and across the globe, with the luxury goods retailer LVMH’s shares falling after it reported a sharp drop in sales for the second quarter in a row.
So far, this morning’s data has made little impact on exchange rates.
Looking back at yesterday’s PMI numbers, new orders for UK services were at their lowest since April, with demand from overseas markets especially weak. Firms continued to cut staff while raising prices, both at an accelerated rate. It’s worth pointing out, however, that UK PMI of 51.2 was no worse and often better than major European economies. US services, on the other hand, were at their best of the year at 55, despite a presumably tariff-caused cut in demand from overseas.
An interest rate cut would surely boost the mood of business and mortgage payers. Retail sales this morning was the last major set of data before the interest rate decision from the Bank of England. The jury is still out on whether they will hold or cut interest rates, but the markets certainly lean towards the likelihood of a cut.
Before all that, we have the US Federal Reserve’s decision next Wednesday. In Europe, the European Central Bank (ECB) kept interest rates at 2%.
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