Currency Exchange Rate Update…
The Pound has enjoyed its best start to a year since 2017.
It’s also up over 3.3% since the start of the year against the Euro. On 19 June it hit its highest level against the single currency since August 2022.
It’s up over 4.5% since the start of the year against the US Dollar. And again on 19 June hit its highest level against the greenback since April 2022.
Against the Australian Dollar, the Pound is up over 7.4% since the start of the year.
And against the South African Rand, the Pound hit its highest level on 26 June since January 2016.
What’s In The News?
In the UK…
The Nationwide reported that UK house prices slumped by 3.5% in June.
The ONS (Office for National Statistics) reported that for the first time on record, UK households put borrowing on hold while simultaneously withdrawing from savings accounts. With net lending to households falling by 33% to £18.4 bn between January and March. That was compared with the final three months of 2022.
The ONS also reported that for the first time since records began in 1987, total currency and deposit transactions were negative. Plus Britain’s debt stock has ballooned to bigger than the size of the entire economy for the first time since 1961.
The busy ONS also reported that underlying inflation hit its highest level in 31 years in May. The CPI (Consumer Prices Index) remained flat at 8.7% in May, higher than most analysts’ expectations.
An outgoing member of the Bank of England’s (BoE) Monetary Policy Committee (MPC), the independent body that sets interest rates, has warned that the BoE risks ‘over-tightening’ in the battle with inflation.
However, a look at a chart showing the last 70-years of BoE base rates shows just how atypical the last 15 years have been.
In the last 70-years, the first time the Bank of England rate got below 3% was in 2008.
The average base rate is around 6%.
The latest Lloyds Bank Business Barometer showed a rebound in business confidence. Which is at its highest for 13-months buoyed by stronger trading prospects and economic optimism. It has risen in three out of the last four months. Sentiment was up in 10 of the 12 UK regions and rose across all four main sectors of the economy. Staffing expectations are at a one-year high, having risen in six out of the past seven months.
Why the Pound strength especially when viewed through the prism of the ever-negative and UK-bashing main-stream and social media?
In the currency world, all things are relative and if you think times are hard in the UK, a quick look abroad may offer some perspective. And reasons behind the rise in the value of the Pound relative to the majority of its competitors.
In June, German manufacturing activity fell to its second-lowest level since the Global Financial Crisis of 2008, just a week after the European Central Bank (ECB) increased its benchmark deposit rate to a 22-year-high.
Weaker-than-expected PMI (Purchasing Manager Index) for both Germany and France dragged down the European PMI deeper into negative territory.
Eurozone manufacturing fell by 1.2 points to 43.6 in June, the sharpest contraction in 3 years. New orders dropped for the first time in five months.
The influential Ifo reported that the outlook for German business has plummeted as the twin shadows of a longer and deeper recession lingers.
In 2022, 1.204 million Germans emigrated, and more than one million people have emigrated for the fifth time since 2016. Germans emigrate mainly to Switzerland, Austria, and the USA.
And In the USA…
HSBC Asset Management are forecasting the US economy will enter a downturn in the fourth quarter of 2023, followed by a “year of contraction and a European recession in 2024”.
However, this week has seen surprisingly strong housing, consumer and durable goods data from the US economy.
We also saw a big upside revision of US GDP for the first quarter of 2023 from 1.3% to 2%, way too strong for the financial markets to ignore. The upshot is that investors bets for the first interest rate cut by the Fed have been put back to March 2024.
The US Supreme Court has curbed universities’ ability to consider race in admissions, a ruling that could have far-reaching consequences for diversity policies at employers across the country.
THE COSMOS OFFER
Of course, currency market volatility can bring trouble but with careful monitoring can also bring opportunity.
At Cosmos, we provide our clients with a relationship not a transaction-based service.
We are pro-active not reactive.
We offer local collection accounts in: the USA; Canada; the EU and the UK saving clients time and money on transfers.
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Please call +44 (0) 300 124 6409 or email us to discuss your individual currency requirements.
This week’s quote is from Theodore Roosevelt, often referred to as Teddy was the 26th US President
“Believe you can and you’re halfway there.”