Sterling fell against most currencies yesterday, including by around a third of a percent against the euro and Canadian dollars and a little more against the Australian dollar.
However, there was a better result against the US dollar, which has been the big loser this week, with sterling returning to its strongest position since early last June.
Overall, however, a negative week for sterling. Data yesterday showing flatlining UK GDP in February would have disappointed the markets and stood in contrast to eurozone industrial production which beat expectations to rise by 1.5% in March.
Annualised economic growth in the UK currently stands at 0.5%, and the IMF expects this to drop to a 0.3% drop overall this year. However, yesterday British Chancellor Jeremy Hunt insisted that the UK would do “significantly better”. Strikes amongst civil servants and teachers were blamed for the disappointing GDP figure, and these appear set to continue.
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Back to business, and while the US president was enjoying a third day rekindling his Irish roots, his entourage will have found their local spending power in Ireland declining. The US dollar fell to its weakest for over a year compared to the euro. However, given the main cause of dollar weakness is falling US inflation it will be a problem Biden is happy to have.
An OECD report yesterday found that the UK suffered the biggest decline in the G7 for workforce participation. Only 78.6% of adults are either in work or job hunting, less than the 79.5% pre-pandemic, with some 500,000 people having left the workforce since the pandemic. However, the UK still has more adults in work than the OECD average. The US, for example, has just 74% of adults in work.
On the subject of jobs, the UK unemployment figure will be the first big data of next week, being released by the Office for National Statistics at 7am on Tuesday. A small rise on the current 3.7% level is expected, and will be closely monitored for signs that the UK economy is suffering from high interest rates.
Also out next week, inflation on Thursday and retail sales on Friday, all of which could affect exchange rates.
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