It was all about the central banks yesterday, even though they sat on their hands. The currency markets were quick to move nonetheless.
Sterling took the harder knock. Since its surge upwards on Wednesday lunchtime it’s slipped by roughly 1.5% against both the euro and the dollar, give or take.
Part of that was the Bank of England holding interest rates as expected, but with a vote to cut rates coming so close – losing by one vote on the nine-member Monetary Policy Committee – which was not expected and points towards a cut next month. The Bank’s growth forecast has been downgraded to 0.9% for 2026, from 1.2%.
The other dent to sterling’s confidence came from politics. Sir Keir Starmer is under pressure for his judgement in choosing Peter Mandelson as ambassador to the USA. The chatter about resignations drags the spotlight back onto UK stability, and investors hate these guessing games.
Over in Frankfurt, the European Central Bank’s steady message helped the euro hold its ground. With inflation at just 1.7% the ECB has the headroom to lower interest rates if growth proves less resilient than they hope.
And in the US, the story is still a mix of politics and data. Kevin Warsh’s nomination as chair of US Federal Reserve has eased some nerves about Fed independence. Today should have been a non-farm payrolls Friday, but that’s been delayed to next week. However, JOLTs job openings did come out yesterday – and were their worst since September 2020. We’ll also get US inflation next week.
In business news, Donald Trump’s policies have been blamed for a 4.2% drop in foreign visitors traveling to the USA, even while overall international travel grew by a similar amount.
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