ExchangeRates.org.uk – The Pound has taken advantage of a dollar retreat, but the UK data releases are likely to add to concerns over the economy and limit underlying Pound support with the Bank of England facing tough decisions.The Pound to Dollar () exchange rate hit 2-week highs just below 1.2450 before a retreat to 1.2425.
According to Scotiabank (TSX:), “A sustained move above 1.2425 would improve the technical outlook.”
The Pound to Euro () exchange rate was unable to make headway and settled around 1.1840.
In comments on Thursday, President Trump stated that he wanted lower energy prices and cuts in interest rates.
Overnight, there was also commentary that he would like to avoid imposing tariffs on China.
A combination of weaker energy prices and lower interest rates would tend to undermine the dollar while a more moderate trade stance would tend to boost other currencies.
ING commented on the China rhetoric; “This seems to feed into the growing sense that Trump is underdelivering on protectionism compared to pre-inauguration remarks, and that ultimately some of those tariff threats may not materialise as long as some concessions are made on trade.”
There was still an important underlying degree of uncertainty.
The bank added; “We would not be entirely surprised if Trump’s next comments on the matter point in the opposite direction.
But barring that, the dollar momentum may remain soft today.”
According to MUFG, “It is already well known, similar to during his first term, that President Trump prefers lower rates and a weaker US dollar to support the US economy but his policy platform of tariffs, tighter immigration and tax cuts if implemented, will help to keep US yields and the US dollar higher for longer.”
Domestically, the GfK consumer confidence index dipped to a 13-month low of -22 for January from -17 previously and compared with consensus forecasts of -18 while all components declined on the month.
Neil Bellamy, Consumer Insights Director, NIQ GfK, commented, “New Year is traditionally a time for change, but looking at these figures, consumers don’t think things are changing for the better.
These figures underline that consumers are losing confidence in the UK’s economic prospects.
The UK PMI manufacturing index improved to a 3-month high of 48.2 for January from 47.0 previously and above consensus forecasts of 47.2.
The services-sector index edged higher to 51.2 from 51.1, above expectations of 50.8, also the highest reading for three months.
The headline figures offered some encouragement, but the components still indicated significant difficulties with orders declining at the fastest rate for 15 months while there was a further retreat in employment.
Overall business confidence also dipped to the lowest level since December 2022.
Input costs increased at the fastest rate for 18 months while output charges recorded the strongest increase since July 2023.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented; The first indicators of business conditions in 2025 add to the gloom about the UK economy with companies cutting employment amid falling sales and concerns about business prospects.
He added that inflation pressures have meanwhile reignited, pointing to a stagflationary environment, which poses a growing policy quandary for the Bank of England.
This content was originally published on ExchangeRates.org.uk
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