The pound is holding onto its gains, climbing by 0.5% and hit $1.3044 earlier, its strongest level against the dollar in a year.
The UK currency was boosted by higher-than-expected UK inflation data, which led to markets paring back expectations of an interest rate cut in August. Before the data, they were almost 50-50; now the probability of a rate cut is seen at 36%.
Sterling has been strengthening in recent weeks, and is up 2.4% against the dollar this year. Investors are attracted by political stability, following the Labour party’s decisive election victory on 4 July.
In France, the centrist prime minister Gabriel Attal and his government resigned on Tuesday, but stayed on in a caretaker capacity until a new cabinet is appointed. The leftwing coalition that won France’s snap election on 7 July is struggling to form a government.
The pound hit a two-year high against the euro of €1.1927 today, and is currently trading up 0.1% at €1.1914.
The FTSE 100 index has slipped by 0.1% or 11 points to 8,151. Other European indices are also trading lower, with Germany’s Dax and France’s CAC down about 0.7% while the Italian borsa slid by 0.4%.
Key events
Closing summary
The pound has gained 0.5% against the dollar to $1.3028, and earlier touched $1.3044. It was last trading at the $1.30 level in mid-July 2023.
Sterling has also hit a two-year against the euro, of €1.1927, and is currently trading up nearly 0.1% at €1.1909.
The UK currency was boosted by higher-than-expected inflation data, which led to markets paring back expectations of an interest rate cut in August. Before the data, they were almost 50-50; now the probability of a rate cut at the Bank of England’s next meeting on 1 August is seen at 35%.
The chances of an August interest rate cut took a blow after a sharp jump in hotel prices meant progress in the UK’s fight against inflation stalled last month.
A near 9% jump in the cost of a hotel room – blamed by some analysts on a “Taylor Swift effect” – offset the impact of cut-price clothing to leave the government’s preferred measure of the cost of living at its 2% target for a second month in a row in June.
With measures of underlying inflation also holding steady, the City said the prospect of the Bank of England reducing the cost of borrowing from its current level of 5.25% at its next meeting on 1 August had diminished.
The pound has gained 2.4% against the dollar so far this year. Investors are attracted by political stability, following the Labour party’s decisive election victory on 4 July.
The FTSE 100 index turned positive early afternoon and is now 35 points ahead at 8,200, a 0.4% gain. Europe’s other major indices are still in the red, trading slightly lower. On Wall Street, the Dow Jones rose 0.35% while the tech-heavy Nasdaq has tumbled 2% and the S&P 500 has slid 1%.
The king’s speech at the state opening of parliament set out the new government’s legislative programme over the next year.
Here are the main points:
Our other main stories today:
Thank you for reading. We’ll be back tomorrow. Bye!-JK
US industrial production rises more than expected
In the United States, industrial production rose by 0.6% in June from May, which was better than expected. Within this, manufacturing output rose by 0.4%, driven by car and aerospace production.
Industrial production also benefitted from a 2.8% jump in utilities output, likely reflecting the unseasonably warm start to the summer and the associated boost to air conditioning demand.
Stephen Brown, deputy chief North America economist at Capital Economics, said this industrial strength is unlikely to have continued into July.
As vehicle sales dropped back in June, it seems unlikely that the rise in motor vehicle production will be repeated. The manufacturing survey indicators continue to paint a gloomy picture of conditions elsewhere, with the ISM manufacturing index at just 48.5 in June.
Similarly, as temperatures have been closer to their seasonal norms so far this month, utilities output will probably quickly drop back. Overall, it seems likely that some of the strength in industrial production in June will be reversed this month.
Returning to the government’s plans for housing, the Federation of Master Builders points out that its bold plans to build 1.5m homes over the next five years, the current skills crisis in the construction industry needs to be addressed.
Brian Berry, the FMB’s chief executive, said:
We are substantially lacking the skilled workers required to build new homes, and to upgrade our existing homes with the energy efficiency improvements which Labour have pledged. The UK is in desperate need of a long-term skills plan, to establish clear pathways into careers in construction. Unless this is delivered it is difficult to see how 1.5 million new homes will be built over the next five years.
Berry concluded:
One startling omission is the lack of plans to upgrade the existing housing stock. We had been expecting to see a bold plan to retrofit 5m homes to make them greener and more energy efficient but clearly the purse strings have not been opened enough to allow for this. While we should be looking to build more homes we mustn’t take our eye of the existing housing stock, which is the oldest and leakiest in Europe.
The king’s speech also announced the nationalisation of railways.
Gideon Salutin, senior researcher at the Westminster think tank Social Market Foundation, said;
By nationalising rail and franchising bus services, the new tovernment is finally challenging the historical misalignment of our public and commercial transport objectives. These have never really clicked, with the private sector prioritising areas based on money rather than need, leading availability to crater in many areas. Bus franchising will end the postcode lottery that has seen bus service protected for some and not for others, while rail franchising will allow a more coherent and efficient transit system.
Yet key questions remain. Labour has pledged to maintain access to the track for privately owned operators that “add value and capacity to the network” but how that will be determined remains undefined. Further, both rail and bus reforms are unlikely to drastically decrease consumer costs, and with no new money entering the system, those delays and cancellations which have plagued the last government could continue. The new government policy is a bold first move, but it still has miles left to go.
However, Philipp Kurek, arbitration partner at law firm Signature Litigation, warned that the plans could lead to disputes with investors, who may claim compensation. He said:
The government’s plans announced in the King’s Speech today that would allow it to renationalise nearly all passenger rail services will need to be scrutinised carefully to ensure that any renationalisation complies with the UK’s obligations under applicable international investment treaties.
The UK is party to more than 100 bilateral investment treaties which provide significant protections to qualifying investors in the UK, including investors (such as shareholders and others with direct or indirect financial interests) in the UK rail infrastructure sector. These treaties contain strict conditions relating to the nationalisation of any protected investment (including an obligation to pay fair market value compensation).
Similarly, a decision by the government not to renew or extend existing contracts when they expire in the coming years may equally give rise to claims for compensation by affected investors.
The Federation of Small Businesses was less impressed, saying the king’s speech announcements fell short on measures to stimulate growth for small firms, and jobs within them.
The FSB’s policy chair Tina McKenzie said the government’s 105-page briefing document doesn’t mention ‘small business’ once, and the group is now looking to the chancellor Rachel Reeves and her autumn budget to take action.
Today’s King’s Speech announcements fell short on the central challenge – getting growth back into the economy and ensuring wealth creation in every local community.
Apart from ambitious-sounding planning reform, there was no sign of delivery of the small business plan promised by Labour in opposition.
The lack of promised legislation to tackle late payments and poor payment practices by bigger businesses to their small business suppliers is the most serious omission for our community and will hold back economic growth. This scourge hampers cashflow and stifles investment, and we call on the Government to look again and deliver on the promise it made.
The move from an Apprenticeship Levy to a Growth and Skills Levy will risk small business apprenticeships unless the Government quickly follows up with its promised unequivocal commitment to protect Government co-investment for apprenticeships at small employers.
Similarly, the Industrial Strategy Council commitment omits mentioning the need for a small business voice, to prevent it being dominated by large corporate incumbent interests.
At the same time, small businesses are increasingly worried about the developing employment rights package. More than nine out of ten small employers say they are concerned about the prospect of increased costs and risks when they employ people, and there were no commitments within this to look after small employers who will struggle the most.
Here is a round-up of the key points of the king’s speech, in which 40 new bills were announced.
Vicky Parker, head of [ower and itilities at PwC UK, welcomed the Great British Energy bill announced in the king’s. speech today. She said:
The policy direction of the new government suggests we are likely to see a growing involvement of the public sector to help drive progress in energy. The announcement of Great British Energy today and a focus on creating a clean energy superpower, being a welcome example of that to accelerate progress to zero carbon by 2030. The success of these institutions is likely to be measured against the amount of private capital they mobilise, how GBE becomes an active participant in the sector, the introduction of electricity market reforms and their ability to deliver new infrastructure in the UK.
To accelerate plans for the UK to meet net zero, significant investment is required across established solutions, such as wind, as well as less mature solutions such as hydrogen, heat pumps and sustainable aviation fuels. The newly-formed National Wealth Fund’s task force, which has been allocated £7.3bn of capital, will focus on investments such as green hydrogen and steel, industrial decarbonisation, ports and gigafactories. There will still be a gap between what is needed and what the market is currently providing, so a step-up is needed across a wide range of different investor types, as no single solution or institution will provide the full suite of financing which is required.
In order to meet the accelerated 2030 targets and demonstrate tangible results, there also needs to be a focus on ramping up the pace of the installation of new, low-carbon infrastructure (generation as well as connection) and tackling long-standing blockers such as planning and financing. Removing planning restrictions and simplifying application processes can unlock offshore wind and accelerate onshore wind development, for example, the latter of which the government has already acted on.
The pound is holding onto its gains, climbing by 0.5% and hit $1.3044 earlier, its strongest level against the dollar in a year.
The UK currency was boosted by higher-than-expected UK inflation data, which led to markets paring back expectations of an interest rate cut in August. Before the data, they were almost 50-50; now the probability of a rate cut is seen at 36%.
Sterling has been strengthening in recent weeks, and is up 2.4% against the dollar this year. Investors are attracted by political stability, following the Labour party’s decisive election victory on 4 July.
In France, the centrist prime minister Gabriel Attal and his government resigned on Tuesday, but stayed on in a caretaker capacity until a new cabinet is appointed. The leftwing coalition that won France’s snap election on 7 July is struggling to form a government.
The pound hit a two-year high against the euro of €1.1927 today, and is currently trading up 0.1% at €1.1914.
The FTSE 100 index has slipped by 0.1% or 11 points to 8,151. Other European indices are also trading lower, with Germany’s Dax and France’s CAC down about 0.7% while the Italian borsa slid by 0.4%.
Rachel Delacour, chief executive and founder of sustainability management firm Sweep,which works with the energy firm SSE and others, welcomed the government’s plans to establish Great British Energy and invest billions in renewables, as mentioned in today’s king’s speech.
GB Energy will be headquartered in Scotland, where much of the UK’s oil and gas and offshore wind industries are based).
She said this is “a major step in the right direction for the UK’s journey towards net zero”. She added
All organisations need to tackle their greenhouse gas emissions, and governments creating the conditions for them to access cleaner energy is a key part of the puzzle.
However, it is crucial that the government puts the appropriate structure in place around a project of this size. This means monitoring it through stringent data collection processes, understanding the impact Great British Energy will have on the environment itself, and providing its users – especially businesses – with the detailed insights needed to reduce carbon emissions. It is only through taking such measures that Great British Energy can truly monitor its impact across the UK and support UK businesses to meet science-based climate targets.
Anthony Codling, housing analyst at RBC Capital Markets, said:
King’s Speech, no surprises, but no details either. The King said that his government would Get Britain building through planning reform as they seek to accelerate the delivery of high quality infrastructure and housing through a Planning and Infrastructure Bill. There was no mention of targets, no 1.5m homes, and no mention of social housing ‘percentages’, suggesting that Labour will take a pragmatic approach to social and affordable housing supply.
However, we expect that Labour will push ahead with its plan to build 1.5m homes over the next five years and do all it can to the planning system to help get Britain building. We expect the housebuilders shares to re-rate as the Labour Policies move from manifesto pledges to policy action. Renters will be happy that no fault evictions will be banned, and homeowners will welcome the plans to reform leasehold and commonholds.
The king’s Speech has set out plans to “start mending broken public services,” says the union Unison.
Its general secretary Christina McAnea said:
These bills are the start of the long process to mend much of what’s been broken by Conservative governments and generate the growth to get public services thriving once more.
Labour’s workplace rights package promises to be a game changer. For too long, bad bosses have had it all their own way. The new deal is a chance to reset the dial in favour of good employers and every UK worker and jobseeker.
Outdated practices like ‘fire and rehire’ and zero-hours are to be consigned to history in a move that’s understandably proved popular with voters from across the political spectrum.
Social care gets some attention at last too. After years of government neglect, the fair pay agreement is the first sign things are set to change, with a national care service the ultimate prize.
Once the new pay agreement is in place, wages in care will rise across England, easing the sector’s staffing nightmare and relieving pressure on the NHS.
The government’s growth agenda is closely linked to devolved regional and local services, yet many councils are teetering on the brink of effective bankruptcy.
Devolving powers and reforming planning regimes can only help generate growth if local government receives sustainable, long-term funding and is able to retain expert staff.
