The pound starts the week at its highest level in over a month against the euro – the result of steady progress last week and a string of positive developments on tariffs.
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Sterling benefitted from two welcome bits of news last week: one from the Bank of England, and the other from the desk of former TV-personality Donald Trump. There was just a hint of Noel Edmunds around Thursday’s UK-USA trade agreement, with Keir Starmer dialling in to say “deal” to the package of auto and steel exemptions.
Regardless of how both leaders try to frame it, trade is rather more complicated than a few cars and construction materials. It is complex and ever-changing, which perhaps explains the Bank of England’s (BoE) predicament. The BoE cut interest rates to 4.25% – their lowest level in two years – last week, while painting an unclear picture of their future movements.
A meeting between US and Chinese officials over the weekend resulted in “substantial progress”. The United States will reduce tariffs on Chinese imports from 145% to 30% for an initial 90-day period, easing fears of a global recession.
The UK has two significant data points this week, the first coming on Tuesday (13 May) in the form of unemployment data and the second on Thursday (15 May) with the quarterly GDP read. Economic growth is expected to have slowed in the first quarter of the year, perhaps even as low as 1% on an annualised basis.
The German ZEW economic sentiment survey is the highlight of another relatively low-key week for the eurozone.
