The pound reaches the end of the month around 1.25% down on the euro. The damage was done at the start of the month with a large drop in GBP/EUR after Germany’s new chancellor decided to ramp up its spending. Since then it’s been a slow and unsteady climb upwards for the pound.
Things are looking healthier against the US dollar, however, with sterling a good 3% stronger than at the end of February as the markets – and Americans in general to judge by some polls – start to count the cost of tariffs and Musk’s Department for Government Efficiency (DOGE).
We will hear the first inklings of the impact of that this week, with the first employment data from the US since DOGE started swinging its axe.
Last week was a heavy one for high-level UK numbers. If you missed it, the gist was much better business confidence in UK services, stronger retail sales figures and inflation coming down. But this was all rather eclipsed by growth forecasts being halved in the chancellor’s spring statement. Retailers are optimistic at least, with the Lloyds Business Barometer finding UK retailers at their most cheerful for a decade, despite the rise in their staffing costs from the Budget last year.
Maybe a different chancellor will be the bigger influence on GBP/EUR, however, as Germany’s Friedrich Merz tears up the rule book on borrowing, spending and Germany’s entire post-war attitude to military spending. This week we have already had some good early numbers for Germany, with retail sales shooting upwards by 4.9% last year. Will that have fed through into higher inflation? We’ll hear at lunchtime for Germany and tomorrow for the eurozone as a whole.
There are so many competing factors right now – the growing trade war, stagflation and, for the UK anyway, the battle for economic growth while staying inside Rachel Reeves’ fiscal rules – that predicting the future is even more impossible than usual. Nevertheless, we are compiling predictions from all the leading banks and our new Quarterly Forecast will be out soon.
If you have signed on the dotted line for a large purchase overseas, however, and attending the Your Overseas Home Virtual Event last weekend I can see that many are, I would urge you to take a safety first approach and lock in your rate as soon as you are committed. These are, as the Chinese say interesting times. You can do that with a call to your Account Manager on 020 8003 4915.
