Blue and gold background, the brand colours of Cosmos Currency Exchange with an image of Tony Redondo the founder of Cosmos with the words to his latest blog called 'Uncertainty'


A very busy period full of mixed economic data releases is fuelling ever higher levels of market uncertainty. With interest rate expectations for the Bank of England (BoE), the US Federal Reserve (Fed) and the European Central Bank (ECB) in the balance.

Both the economic and political outlook remain uncertain.

Currency Exchange Rates Update

The Pound to Euro exchange rate fell back last week, still trading nearly 1.5% up from the start of 2024.

The Pound to US Dollar exchange rose between its one-month low of 21 January to hit a one month high on 14 February before falling back again.

A similar story for the Pound to Australian Dollar. Which climbed from a one month low at the end of January to hit a one month high on 14 February before falling back again.

What’s In The News?

Last week was a busy week for the UK economy. With four major pieces of data released and all pointing in different directions!

On Tuesday, wage growth data came in slightly higher than expected but with lower unemployment. The financial markets started pricing in the idea that the BoE could keep UK interest rates higher for longer on the idea that this data indicates a greater danger of inflationary persistence.

However, on Wednesday, the inflation data came in below expectations at 4%. Perhaps inflation is not so bad after all? The Pound fell as the markets re-evaluated the timing of a possible BoE interest rate cut.

Last Thursday confirmed the UK’s long-awaited recession. After GDP data showed a fall of 0.3% in the final quarter of 2023. This was worse than analysts had expected.

Finally, on Friday retail sales surprised to the upside. Raising hopes that the UK will be able to escape its recession fairly quickly.

As ever, the BoE have a delicate balancing act on their hands. Cut UK interest rates too soon and the BoE could effectively be stimulating an economy that is already back on its way up. Even if done slowly potentially unleashing another inflationary spike. Whereas waiting too long the economy might be constrained needlessly. Thus leading to a deeper and longer recession than would otherwise be the case.

Politically, Labour overturned majorities of just over 11,000 and 18,000 to gain both the Kingswood and Wellingborough constituencies last week in a possible foretaste of an election wipeout for the Conservatives. Labour had not won either seat since the Blair and Brown years. However, opinion polls show that Labour leader Sir Keir Starmer is not wildly popular with the public.

These byelection results do however appear to cement Reform as the third party in British politics, not least after the Liberal Democrats kept neither of their deposits. Winning fewer than five per cent of the vote in each seat. The manner in which Sir Ed Davey when Post Office Minister dealt with Mr Bates had a catastrophic effect on the Lib Dem turnout at both byelections where both candidates lost their £500 deposits for falling to win 5% of the vote.

In The UK…

The plunge into a technical recession increased speculation that the BoE might accelerate interest rate cuts to stimulate economic growth.

The possibility of UK interest rates remaining high is bad news for consumers, businesses and politicians. But helps the Pound Sterling retain an attractive yield advantage over its currency peers. The premium of UK government bond yields over those in the rest of the G10 is above 110 basis points at present. This compared with an average of just 20 basis points over the last 10 years. As a result, investors are holding long sterling positions worth $2.71 billion. One of the largest in the last 10 years. The Pound Sterling remains the best performing G10 currency against the USD in the year-to-date. It’s also up against the low-yielding Japanese yen by nearly 5% since the start of 2024.

Ruth Gregory, Deputy chief UK economist at Capital Economics said, “This recession is as mild as they come and timely indicators suggest it is already nearing an end.”

Despite the two byelection victories, a survey by Savanta shows the Labour lead over the Tories has dropped to its lowest level since June 2023.

Good News

Signs of a UK economic rebound include:

1.            The Halifax’s measure of UK house price trends revealed a 1.3% month-on-month rise in January, up from 1.1% in December. It’s the fourth monthly gain in a row.

2.            UK total retail sales increased by 1.2% year on year in January according to the BRC (British retail Consortium).

3.            UK services activity rose at the fastest pace in 8 months, according to January PMIs (Purchasing Managers Index).

4.            UK business confidence hit a 2-year high in January according to the latest Lloyds Bank’s Business Barometer.

5.            According to one forecast, UK energy prices are coming down by 15%.

6.            The fact that the headline rate of inflation remained steady in January points to stronger than anticipated disinflationary pressures.

The OECD (Organisation for Economic Co-operation and Development) is predicting that the UK economy will grow at the same or faster pace than Germany, France, and Italy in both 2024 and 2025. Not by a big deal but can you imagine what the ever negative British main-stream press would make of it if it were the other way around!

Not So Good News

The ONS (Office for National Statistics) reported 9.25 million people aged between16-64 are not working or looking for work. Therefore officially classed as “economically inactive”.

New figures from the BRC (British Retail Consortium) show a spiralling crisis on shop floors. This is after violence and abuse of workers surged by 50%. Shop staff facing 1,300 incidents of violence and abuse every day over the year to August 2023. The astonishing total is equivalent to 54 incidents of violence or abuse towards retail staff across the country every hour. The new BRC report lays bare the crime wave sweeping the sector, with theft surging alongside abuse.

The latest UK Finance figures show homeowner mortgages in arrears has increased by 7% in the previous quarter. Arrears have increased as a result of the rapid rise in interest rates. After the BoE raised UK interest rates from 0.1% in late 2021 to a post-financial crisis high of 5.25%.

The FT (Financial Times) reported Iran used two of the UK’s biggest banks to covertly move money around the world. Part of a vast sanctions-evasion scheme fronted by companies backed by Tehran’s intelligence services. Both UK banks, Santander and Lloyds are accused of providing bank accounts to holding companies linked to a state-backed Iranian petrochemicals company. Both having been under western sanctions since 2018.

UK wind farms are being accused of routinely overstating how much wind they are going to produce. Of 121 wind farms surveyed, 40 overstated their power production by 10% and 27 by 20%. When the UK’s grid does not require further wind generated power, there is a tariff for those wind farms not to produce wind power and it is the consumer that pays for that non generation. Despite the fact that the wind farm is not producing that power yet says it can means the wind farm will still get paid. This is at an estimated cost, to the consumer, of £800 million per annum. Plus the added environmental cost of the additional carbon pumped into the atmosphere.

In The USA…

In another sign of persistent inflation in January, wholesale prices rose more than expected according to the US Labor Department. This just days after the consumer price index showed inflation holding stubbornly higher despite Federal Reserve expectations for moderation through the year.

This is likely to add to the Fed’s caution about potential interest rate cuts.

After beating estimates for six straight months, US retail sales declined in January by the most in nearly a year.

Separate data showed US factory production fell for the first time in three months in January.

Lars Mouland, Chief Credit and Rates Strategist at Nordea Bank, one of Scandinavia’s biggest investment banks is now forecasting that the Federal Reserve “can no longer be sure inflation is on a fast track to 2%. We now expect the first 0.25% rate cut in September, followed by another in December and March 2025”. Market consensus was the first cut would be June.

At the start of the year, the first Fed rate cut was priced in for March.

The New York Fed reported that credit card delinquencies surged by more than 50% as total consumer debt swelled to $17.5 trillion in 2023, indicating ‘financial stress’.

The new year has been marked by big technology companies slashing employees by 32,000 to date. The 2024 round of mass terminations follows a 2023 during which the tech industry was also heavily engaged in dismissing large numbers of staff.

Ex President Trump is 11 points clear of President Biden in the latest opinion polls. What could alter such a lead in the next nine months bearing in mind that Trump has already been endorsed by 76% of the Republican party? Trump faces 91 felony charges in 4 separate prosecutions in 3 different jurisdictions. The first prosecution is in NYC where if found guilty, Trump could face up to 136 years in jail. The next is a federal prosecution which could mean as much as 450 years jail time. The other two, one federal and one in Georgia could mean 55 and 76.5 years respectively. All add up to 717.5 years. In addition, a US federal appeals court has ruled that Trump is not entitled to immunity as an ex-President.

In The EU…

Data out this week confirmed the Eurozone economy’s stagnation continued in the final quarter of 2023. Whilst it avoided a recession, it has not shown any sign of life since the beginning of last year.

The EU Commission has revised back its economic growth forecast from November’s 1.2% to 0.8% for its 20 member countries. The EU Commission did however improve its inflation forecast, anticipating an inflation rate of 2.7% for 2024 and 2.2% for 2025.

Germany was the only G10 economy to shrink last year, and continued weakness this year will likely weigh on rest of the bloc, especially the manufacturing sector, which has been in contraction since July 2022.

Germany’s business leaders seem more realistic about the outlook for Europe’s largest economy than their political leaders. Chancellor Scholz sidestepped his speech making duties last week. His replacement, managed with a straight face to announce that Germany was not in a recession despite the 2023 contractions in its economy and moreover was set for a strong economic performance in 2024. That strong economic performance is optimistically defined as being growth of 0.5%, the weakest outlook for any of the largest global economies.

German industrial production (including construction) for December confirmed a sector that remains under pressure. Industrial output in Europe’s largest economy contracted by 1.6%, a bigger drop than forecast, leaving production levels 3% lower than a year ago.

A top German industry chief, Siegfried Russwurm, head of the BDI has described Chancellor Olaf Scholz’s net zero policies as “absolutely toxic” in a stinging criticism of the chancellor’s stewardship of Europe’s largest economy.


Alexey Navalny, the Russian lawyer, and anti-corruption activist and the most prominent opposition voice to Vladimir Putin, has died at the age of 47, according to the Russian government who gave no cause of death.

In 2020, Navalny barely survived a nerve-agent attack that he and Western governments blamed on Putin. After treatment in Germany Navalny returned to Russia where he was immediately imprisoned.

Russia’s electoral authorities have barred war critic Boris Nadezhdin from running in next month’s presidential elections.

Japan’s economy unexpectedly slipped into recession dropping Japan from third to fourth place of the world’s biggest economies.

In China, the NBS (National Bureau of Statistics) announced the country’s consumer prices index fell by 0.8pc in January, marking the fourth straight month of deflation and the steepest fall since 2009. The fall was larger than the 0.5% forecast by analysts and comes as Beijing tries to kickstart growth amid a property crisis, soaring youth unemployment and a global slowdown that is hammering demand for Chinese goods.

In its latest review, the MSCI is cutting 66 Chinese companies from its global stock market benchmarks following a market rout that’s erased trillions of dollars in value from the nation’s stocks. Chinese stocks have dropped by almost $5 trillion in value since their 2021 peak at a time that global equities are close to record high levels.

Much of that money is now heading for India, with Wall Street giants like Goldman Sachs and Morgan Stanley endorsing India as the prime investment destination of the next decade.


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. Alternatively if you’d like to receive our fortnightly blogs via email please subscribe here.


This week’s quote comes from Carl Jung, the Swiss psychiatrist and psychoanalyst

“Thinking is difficult, that is why most people judge”.

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