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Markets keep their cool with mild ‘Burnham bounce’
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The UK is sweltering under the same ‘heat dome’, as the meteorologists put it, as the rest of western Europe this week, but the UK has the added stress of an upcoming change in prime minister.
The markets are taking this all quite cooly so far, and there has even been a bit of a ‘Burnham bounce’ for GBP/EUR this week, taking it close to the best it’s been since last July.
Even so, for the pound-to-euro rate the past year this has been the longest period with so little movement that most of us can remember and it is unlikely to remain so steady indefinitely.
When the rains come, will your clients be protected?
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Useful articles for you and your clients
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Why the pound “takes the stairs up and the lift down”
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To help you more effectively explain currency, read top-level updates on what’s happening with popular exchange rates.
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GBP: Sharp movements against all but euro
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Even the news that Britain will have its seventh prime minister in a decade failed to move the pound to euro rate from where it has squatted since last July. Aside from politics, last week’s economic data was – and the irony will not be lost on the PM or his chancellor – unequivocally positive. Inflation down, unemployment down, interest rates held, earnings better than expected and retail sales up. While the British are still spending, however, the property market remains in a parlous state, especially in the more affluent South East and London, gumming up plans to buy, move or retire overseas. While GBP/EUR is unmoved, the past month has seen sharp gains against the Scandinavian currencies and various dollars other than the US. GBP/USD has been the biggest loser in June, down close to 2%.
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EUR: Is one ECB rate rise enough?
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The quarter-point interest rate rise from the European Central Bank (ECB) this month failed to bounce the euro higher and it continued to lose ground to the US dollar, hitting a three-month low, while moving sideways against sterling. It could also have contributed to this morning’s PMI results showing German businesspeople even glummer than last month. A potential unblocking of the logjam in the Straits of Hormuz looks like good news for European business, while ECB president Christine Lagarde has been a little more dovish sounding, with no more interest rate rises planned. Good news for most of us, but not for euro strength.
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While Trump’s own MAGA base may be doubting his geopolitical strategy, the dollar has been strengthening across the board. Gains this month included 4-5% on NOK and SEK, and 2-3.5% on almost all other major rivals. The new chair of the US Federal Reserve Kevin Warsh took over with Trump angling for interest rate cuts, but that is simply not the world we are in at the moment and a hold last week was as good as it will get. In any case, the US economy appears unfazed by the continued on-off war in the Middle East with PMI rates that the UK and EU can only envy.
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*Percentages and exchange rates correct at time of publishing
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