Sterling Update: Data releases could prove difficult tests for pound’s strength

Sterling Update: Data releases could prove difficult tests for pound’s strength

Here’s the latest currency news from our partner Moneycorp, to help you find out what your money is worth.


Somewhat surprisingly, GBP, alongside USD, has emerged as the best-performing G10 currency this year*. Monetary policy was the main driver of currency strength last year, and the BoE’s generally bullish stance may have provided the strong tailwind for the currency we saw in the final months of 2023 and now in 2024.

However, current disinflationary pressures could mean the BoE will be forced to reassess its monetary policy outlook and ease interest rates sooner or faster than expected. Markets are currently pricing in three further interest rate cuts this year compared to their expectations in December, meaning we could see as many as 1.25% cuts over the year.

The forecast for falling inflation has sped up significantly, which has led Deutsche Bank, Investec, and Oxford Economics to anticipate inflation to fall below the BoE target of 2% within four months. This could be a consequence of a reduction in energy prices.

However, the latest CPI inflation data for the UK was released on Wednesday morning, showing an unexpected acceleration. The Consumer Price Index in the UK rose by 4% in December, up from 3.9% in November and 0.2% more than the 3.8% expected by markets. 

This is the first time inflation has risen since February 2023 and could relieve pressure on the Bank of England to start cutting rates.

The major contributors to the increase were alcohol and tobacco after a recent increase in duty, which was balanced by the continued downward trend from food and non-alcoholic beverages. The UK’s data follows the trend of slightly increasing inflation we’ve also seen in the US and EU last month. 

This week also saw the UK’s Claimant Count data released on Tuesday, falling well below the forecast of 18.1K to 11.7K  and the latest Retail Sales data this morning, which was forecast to contract by -0.5%. Retail sales volumes came in much lower than expected and were estimated to have fallen by -3.2%. These data releases could prove difficult tests for Sterling’s strength.


Last week saw the release of the latest Eurozone Inflation data, which jumped from November’s figure of 2.4% to 2.9%, below forecasts but against the general trend for the last 15 months. German Preliminary CPI came in at 0.1%, below the expected 0.2% on Thursday 4th January, but against the general trend again.

This week, we saw the Final CPI release, which came in as expected at 2.9%, and European Central Bank President Christine Lagarde spoke at various engagements throughout the week, including at the World Economic Forum in Davos.

The European Central Bank is due to meet on the 25th January. The probability of the bank cutting rates is only 3.4%, according to a Bloomberg forecasting model. However, the ECB is expected to reduce rates to 2.5% by December this year. Last month, projections were for rates to end 2024 at 3%, with markets pricing in two further cuts during the year in January. The Governor of Portugal’s Central Bank, Mário Centeno, made the news last week after he said that the ECB would cut rates sooner than it had recently thought and that it shouldn’t wait till May to decide.


Why Moneycorp?

With a Platinum Trusted Service Award 2020 from independent review site Feefo and 40 years of experience in the industry, FrenchEntrée has been recommending Moneycorp for more than 15 years. During this time they have helped thousands of client planning the best way to pay for their property as well as supporting them afterwards with any further payment from paying bills, mortgages to repatriating UK pension payments for those who have retired to France.

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Furthermore, we have worked with the same person at Moneycorp for more than a decade! You might be familiar with her as she often writes for our French Property News magazine. She has 13 years’ experience in foreign exchange, and is a qualified European lawyer with experience in European transactions. Mar will be happy to answer any questions or enquiries to support you through these difficult times.

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