Closing summary: Sterling slumps 1.4% against US dollar
The value of sterling has slumped against the US dollar after a combination of slower UK inflation and stronger US retail sales suggested a monetary policy gap might open up between the countries.
The pound has dropped by 1.4% to about $1.2000 against the US dollar in afternoon trading in London.
Weaker inflation reduces the case for further rate hikes in the UK, and vice versa for the strong US retail data. Higher relative interest rates in the US push up the value of its currency.
The US data “points to solid underlying momentum in consumer spending and is consistent with the strength of the labor market at the turn of the year,” said Mickey Levy, an economist at Berenberg.
In the UK, it may be time for a pause for the Bank of England, said Sanjay Raja of Deutsche Bank.
With regards to monetary policy, we still see a case for one more hike (0.25 percentage points) before the MPC opt more explicitly for a ‘conditional pause’. That said, slowing momentum in both the wage and inflation data will likely make next month’s rate decision more finely balanced than markets expect.
In other developments from today:
Morrisons’ credit rating has been downgraded after the supermarket reported poor sales and profits in the latest blow for the UK’s fifth-largest supermarket.
Glencore will give almost £6bn to shareholders after the mining and commodities company reported record pre-tax profits of more than £28bn in 2022, boosted by rocketing oil and coal prices.
Barclays staff will share £1.2bn in bonuses this year despite a 15% drop in the bank’s annual profits after it was hit by the costs of a US trading blunder and more money being put aside for a potential jump in defaults by borrowers.
Administrators have failed to find a buyer for collapsed regional airline Flybe, so its assets will be sold off.
UK house price inflation eased in December to annual growth of 9.8%, according to official figures.
You can continue to follow our live coverage from around the world:
In our UK politics coverage, Nicola Sturgeon denies ‘short-term pressures’ were behind her resignation as Scottish first minister
In our coverage of the Russian invasion of Ukraine, Luhansk’s governor denies Russian claims of breakthrough in the region
In the US, Biden seeks to turn voters against Republicans by casting them as spendthrifts
Thank you for following our live business coverage. Please do join us tomorrow for more of the same. JJ
British oil and gas producer Capricorn Energy has abandoned an attempt
to merge with Israeli gas group NewMed Energy, weeks after its top
brass resigned simultaneously.
Capricorn said on Wednesday that it had pulled the plug on the
proposals, which had been opposed by activist investor Palliser
Capital and some of the company’s biggest shareholders.
London-listed Capricorn’s chief executive and most of the board
suddenly quit last month, to be replaced by directors put forward by
Palliser.
The company, formerly known as Cairn Energy, said then it would kick
off a strategic review. Today it said that, following the review, it
has “mutually agreed that the business combination agreement” between
it and NewMed be terminated.
The collapse of the deal represents Capricorn’s second pulled merger
in less than a year after the proposed $1.4bn tie-up with rival Tullow
Oil – which also faced investor opposition - was ditched in September
to pursue the NewMed deal.
-copy-dd1f2bf0.jpeg?w=600)
