Over the Christmas and New Year period the pound has been stable against the euro, while dropping about 2% against the dollar since early December.
The question for the start of this year is whether the pound will stay strong against the euro as the Bank of England (BoE) works out how to boost growth while keeping control of inflation.
At present, GBP/EUR remains close to 4% stronger than this time last year. To lock this rate in, call your account manager on 020 3504 3772.
So far in January, there has been interesting data on UK housing. On Friday, the BoE revealed that while mortgage approvals in the UK were slightly lower than November’s high, at 65,700 they were still well above the 12-month average of 60,400. Coupled with Thursday’s news that UK house prices had increased by 4.7%, the fastest pace of increase since October 2022, the activity is indicative of buyers eager to complete their purchases ahead of 1st April’s stamp duty changes.
Affecting the euro, later today, Germany’s official statistics agency Destatis will reveal the country’s year-on-year inflation, which is forecast to rise by as much as 0.3 percentage points to 2.5%. While the rise could be another blow to Olaf Scholz’s coalition ahead of February’s election, with a packed week of eurozone data releases it will be difficult to identify its impact on the euro’s stability.
On Friday, President Biden’s announcement that he would stick to his pledge and block Nippon Steel’s acquisition of US Steel led to minor USD losses against GBP and EUR. Biden said it was a “national security priority” to protect the country’s supply chains, preventing the Japanese acquisition. The impact of this protectionism gives a taste of what may happen with Trump’s tariffs.
Later this morning, we will get final results for the Purchasing Managers Index (PMI) across the eurozone and UK. If revised from earlier estimates, these could well affect exchange rates.
Also coming up this week, the EU will publish eurozone-wide inflation and unemployment rates tomorrow. The USA has two impactful employment reports this week. Its JOLTs job opening report tomorrow and it will close out the week with Non Farm Payrolls on Friday. NFP is regarded as the surest test of the state of the US labour market.
