Sterling slips with economic data, tariff uncertainty in focus
Sterling slipped 0.3% and last fetched $1.3601 against the U.S. dollar, while the pound was broadly unchanged against the euro at 86.23 pence.
Last week saw investors in UK assets rattled by ambiguities around the health of public finances, as a number of U-turns by the governing Labour Party over welfare reforms sparked speculation around the future of finance minister Rachel Reeves.
Traders are now shifting their focus to a set of data this week, with Monday bringing a report that showed British house prices stagnated month-on-month during June as expected, after an increase in tax on property transactions took effect in April.
However, "the post April dip is likely to fizzle out", said Victoria Scholar, head of investment at interactive investor. "Plus, mortgage lending is improving, thanks to four rate cuts from the Bank of England over the last year and two more priced in this year."
Later in the week, traders will scrutinize a report on gross domestic product that could offer clarity on the health of the UK economy and determine the outlook on interest rates.
Bank of England policymaker Alan Taylor said late on Friday that he thought it would be better to cut interest rates now rather than wait and risk needing to cut them in a hurry.
Taylor expects the Bank Rate to fall to "around 3%" by the end of next year. Traders largely anticipate the next 25 basis points interest rate cut by the central bank will be in September, according to data compiled by LSEG.
Meanwhile, investors globally were awaiting a Wednesday deadline ahead of which economies scrambled to strike trade deals with the U.S. to avoid sharply higher duties on their exports to the United States.
Britain was the first to secure an agreement with the U.S. in May and has avoided the additional tariffs on steel and aluminium. Negotiations are ongoing to remove existing 25% duties on industrial metals altogether.
The pound has appreciated about 2% since the deal with the U.S. and is trading close to its highest level since late 2021, also benefiting from a broader dollar weakness.
Separately, a Deloitte survey showed British business executives now see greater opportunities closer to home, while the attractiveness of the United States as an investment destination dwindled.
In other news, Reeves is expected to announce a 28.6 million pound ($39 million) investment by the National Wealth Fund in a carbon capture project that could create jobs in central and northern England, as the government strives to shore up public support.
(Reporting by Johann M Cherian; Editing by Aidan Lewis)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Khaleej Times
a day ago
- Khaleej Times
Trump, Fed chief Powell bicker during tense central bank visit
Donald Trump and US Federal Reserve chairman Jerome Powell appeared together for a tense meeting Thursday as the president toured the central bank after ramping up his attacks on its management of the economy. Trump — who wants to oust Powell for refusing to lower interest rates but likely lacks the legal authority to do so — has threatened to fire the Fed chief over cost overruns for a renovation of its Washington headquarters. During a brief but painfully awkward exchange in front of reporters during a tour of the building, the pair bickered over the price tag for the makeover, which Trump said was $3.1 billion. Stay up to date with the latest news. Follow KT on WhatsApp Channels. The actual cost of the facelift has been put at $2.5 billion and Powell was quick to correct the president, telling him, "I haven't heard that from anybody." Trump produced a sheet of paper apparently listing construction costs and was told curtly that he was including work on the William McChesney Martin Jr. Building, which was not part of the project. "You're including the Martin renovation — you just added in a third building," Powell scolded. Trump stuck to his guns, saying it was part of the overall redevelopment. Powell shot back, "No, it was built five years ago. We finished Martin five years ago... It's not new." Trump moved on but the tense atmosphere between the pair was almost palpable, with the Republican leader unaccustomed to being contradicted live on air. The tour came with Trump desperate to shift the focus away from the crisis engulfing his administration over its decision to close the file on multi-millionaire sex offender Jeffrey Epstein, who died in 2019 while awaiting trial on trafficking charges. Attorney General Pam Bondi informed the president in the spring that his name appeared in the Epstein files, according to the Wall Street Journal. Epstein was accused of procuring underage girls for sex with his circle of wealthy, high-profile associates when he died by suicide in a New York jail cell. Trump has picked all manner of targets, including his Democratic predecessors and former chiefs of the security and intelligence services, as he tries to move Epstein out of the headlines. He berated Powell over interest rates on Wednesday, and alluded to his annoyance over the cost of borrowing more than 10 times during Thursday's tour. "As good as we're doing, we'd do better if we had lower interest rates," he told reporters. 'Do the right thing' Presidential visits to the Federal Reserve are not unheard of — Franklin D. Roosevelt, Gerald Ford and George W. Bush all made the trip — but they are rare. Trump has criticized Powell for months over his insistence on keeping the short-term interest rate at 4.3 percent this year, after cutting it three times last year, when Joe Biden was in office. Powell says he is monitoring the response of the economy to Trump's dizzying array of import tariffs, which he has warned could lead to a hike in inflation. But Trump has angrily accused Powell of holding back the economy, calling the man he nominated in his first term "stupid" and a "loser." The president struck a more conciliatory tone later Thursday, telling reporters they'd had a "productive talk" on the economy, with "no tension." "It may be a little too late, as the expression goes, but I believe he's going to do the right thing," Trump said. Soaring costs for the Fed's facelift of its 88-year-old Washington headquarters and a neighboring building — up by $600 million from an initial $1.9 billion estimate — have caught Trump's eye. A significant driver of the cost is security, including blast-resistant windows and measures to prevent the building from collapsing in the event of an explosion. The Federal Reserve, the world's most important central bank, makes independent monetary policy decisions and its board members typically serve under both Republican and Democratic presidents. Experts question whether Trump has the authority to fire Powell, especially since a Supreme Court opinion in May that allowed the president to remove other independent agency members but suggested that this did not apply to the Fed.
Zawya
a day ago
- Zawya
Trump suggests Fed may be ready to cut interest rates
President Donald Trump said on Friday he had a good meeting with Federal Reserve Chair Jerome Powell and got the impression that the head of the U.S. central bank might be ready to lower interest rates. The two men met on Thursday when Trump made a rare visit to the U.S. central bank to tour its ongoing renovation of two buildings at its headquarters in Washington, which the White House has criticized as costing too much. Trump and Powell sparred over the price tag of the project during the visit. Trump also took the opportunity to again publicly call on Powell to slash rates immediately. "We had a very good meeting ... I think we had a very good meeting on interest rates," the president told reporters on Friday. The Fed is widely expected to leave its benchmark interest rate in the 4.25%-4.50% range at the conclusion of a two-day policy meeting next week. Powell has said the Fed should wait for more data before adjusting rates. The U.S. central bank also said on Friday it was "grateful" for Trump's encouragement to complete the renovation of its buildings in Washington and that it "looked forward" to seeing the project through to completion. (Reporting by Doina Chiacu and Brendan O'Brien; Editing by Doina Chiacu and Paul Simao)
Zawya
a day ago
- Zawya
IMF sees risk that UK is knocked off course to fix public finances
The International Monetary Fund said Britain's government risked being knocked off course for meeting its targets to repair the public finances and it urged finance minister Rachel Reeves to give herself more leeway through tax or spending measures. In a final version of an annual report on Britain's economy, the IMF said changes introduced by Reeves to the government's deficit reduction plans had enhanced the credibility and effectiveness of fiscal policy. "Risks to this strategy must be carefully managed. In an uncertain global environment and with limited fiscal headroom, fiscal rules could easily be breached if growth disappoints or interest rate shocks materialize," the IMF said. The Fund also said the risk of overly-frequent changes to tax and spending policy could be reduced by changes including the creation of more fiscal room for manoeuvre by Reeves to meet her targets. "The first best (option) would be to maintain more headroom under the rules, so that small changes in the outlook do not compromise assessments of rule compliance," it said. In response to the report, Reeves said in a statement that the Fund had backed her choices for Britain's economy to recover and that her plans would "tackle the deep-rooted economic challenges that we inherited in the face of global headwinds." Reeves is under pressure to raise taxes later this year to remain on course to meet her budget targets, having already increased social security contributions paid by employers and along with revenue-raising measures in late 2024. (Writing by William Schomberg, editing by William James)
