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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Sterling dips from 10-month high against dollar; JP Morgan profits jump 52%; US retail sales drop – as it happened

United States Gold Inflation silver Economy Jeremy Hunt US Federal Reserve Singapore United Kingdom US Dollar
The skyline of the City of London.
The skyline of the City of London. Photograph: Thomas Krych/ZUMA Press Wire/REX/Shutterstock

Closing summary

Time for a recap

The pound has slipped back from its highest level against the US dollar since last summer.

Sterling hit a 10-month high of $1.2546 against the dollar early this morning, for the first time since June 2022. It was lifted by data this week showing US inflationary pressures easing and a rise in jobless claims.

But the dollar has picked up some strength this afternoon, after Federal Reserve policymaker Christopher Weller said US central bankers “haven’t made much progress” in fighting inflation, meaning rates must be raised higher.

The latest economic data from the US paints a mixed picture. Industrial production rose by 0.4% last month, but retail sales dropped 1%…. and consumer confidence has risen.

The boss of JP Morgan, Jamie Dimon, has said “storm clouds” threatening the banking sector have grown since last month’s short-lived crisis but the lender is prepared for further turmoil to come after first-quarter profits rose by 52%.

Dimon said:

“The storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks.”

Global demand for oil this year is on track to rise to a record 101.9m barrels per day as China leads an economic surge among developing nations, the world’s leading energy body has forecast.

The FTSE 100 is ending the week strongly, up 42 points or 0.55% at 7885, led by banking stocks.

Shares in veterinary medicine maker Dechra Pharmacy have jumped 34% after it confirmed it was in talks over a possible £4.6bn takeover offer.

But fashion brand Superdry has warned that it no longer expects to make a profit this year and may have to raise new funds as a damp spring and the cost of living crisis hit sales.

Lord Simon Wolfson’s pay slumped almost 40% last year to £2.5m as the boss of Next collected smaller bonuses after missing some targets on earnings per share and returns to shareholders.

Leaders of the biggest rail workers union are considering an “updated” offer from train companies aimed at resolving the long-running dispute over jobs, pay and conditions.

The IMF is calling on Western countries to put together a debt relief and aid package to match that of the landmark Gleneagles summit deal in 2005, to fight a severe funding squeeze affecting struggling African countries.

British shoppers are switching from fresh to frozen food as they try to keep down spending amid the cost of living crisis, retail data suggests.

Aldi and Lidl have announced they will cut milk prices to 90p per pint, with Morrisons expected to follow on Monday.

Boeing has revealed that deliveries of its bestselling 737 Max plane will be delayed, in the latest blow to the US manufacturer in its long recovery from a crisis started by the troubled model.

US consumer confidence rises

US consumer confidence has crept up this month, according to the latest data from the University of Michigan.

The Index of Consumer Sentiment rose to 63.5 points for April, up from March’s 62.0, with people more optimistic about current economic conditions and economic prospects.

However, Americans are anticipating higher price rises. Year-ahead inflation expectations rose from 3.6% in March to 4.6% in April.

Surveys of Consumers director Joanne Hsu explains:

Consumer sentiment was essentially unchanged this month, inching up less than two index points from March. Sentiment is now about 3% below a year ago but 27% above the all-time low from last June.

Rising sentiment for lower-income consumers was offset by declines among those with higher incomes. While consumers have noted the easing of inflation among durable goods and cars, they still expect high inflation to persist, at least in the short run. On net, consumers did not perceive material changes in the economic environment in April.

Next chief Lord Wolfson's pay slumps

A Next clothing retail store is seen in London.

Lord Simon Wolfson’s pay slumped almost 40% last year to £2.5m as the boss of Next collected smaller bonuses after missing some targets on earnings per share and returns to shareholders.

Wolfson could earn up to £5.6m in the year ahead, if he hits all Next’s targets, after a 5% rise in basic salary to £908,000, the retailer’s annual report shows.

The average worker got an 8.7% pay rise.

Next said it was opening tech hubs in Sri Lanka and India as it was struggling to recruit enough IT workers in the UK to support the ambitious expansion of its online retail services arm.

The report explains:

“The UK market remains highly competitive with a limited talent pool in the local area.

The tech team headcount grew 23.5% from last year, which had a significant impact on how we induct, integrate, communicate and manage the talent coming through.”

Back in the UK supermarket sector, Morrisons saying it is going to cut the price of milk on Monday.

That follows Aldi and Lidl’s move to cut their milk prices to 90p per pint, matching Sainsbury’s and Tesco’s announcements this week.

But Sue Davies, the head of food policy at consumer group Which?, said supermarkets’ could make more effort on price cuts:

“Any price reduction is good news for consumers, but 5p off a pint of milk won’t make a huge difference when it comes to year-on-year food price inflation, which is almost 25% at some supermarkets, according to our research.

This step shows that pressures are easing but supermarkets should be doing a lot more to ensure healthy, nutritious food is more widely available, especially in those areas most in need and to make sure pricing is clearer, more transparent and more consistent, so consumers can easily compare prices in-store and with other supermarkets.”

IMF calls for ‘another Gleneagles moment’ on debt relief and aid

Western countries need to put together a debt relief and aid package to match that of the landmark Gleneagles summit deal in 2005 in order to counter a severe funding squeeze affecting struggling African countries, the International Monetary Fund has said.

Abebe Selassie, the director of the IMF’s African department, said without a scaling up of financial support some of the world’s poorest countries would have no chance of meeting the 2030 UN goals for poverty reduction.

“We need another Gleneagles moment,” he said in an interview with the Guardian’s economics editor Larry Elliott, before the release of the IMF report on the state of countries in sub-Saharan Africa.

At the Gleneagles summit 18 years ago, the G8 group on industrialised countries agreed to double aid to Africa and announced a comprehensive package of debt relief. Selassie said something similar was now required.

The IMF official said that even before the pandemic it looked like a “tall order” for low-income countries in Africa to meet the UN’s 2030 sustainable development goals. Now recent shocks – Covid 19, higher inflation and the war in Ukraine – had made the situation “very difficult”.

Selassie added that countries needed help not just to alleviate poverty but to meet the challenge of global heating.

He said:

“The inexorable logic of climate change is beginning to affect the region.

“Nobody expected the series of shocks seen in recent years.”

Here’s the full story:

Wall Street has opened in the red, with the S&P 500 index dipping by around 0.1%.

Global oil demand on course for record as China’s economy rebounds

Global demand for oil this year is on track to rise to a record 101.9m barrels per day as China leads an economic surge among developing nations, the world’s leading energy body has forecast.

The International Energy Agency’s predicted daily average for 2023 is 2m bpd higher than last year’s figure.

The price of a barrel of oil rose from $85.62 (£68.44) to $86.10 on Friday morning after the IEA’s report was published.

The agency warned that a recent decision by the world’s biggest oil exporters to cut their production could drive oil prices higher, in a blow to efforts to reduce inflation and reset economic growth in developed countries. “This augurs badly for the economic recovery and growth,” the IEA said.

“Consumers confronted by inflated prices for basic necessities will now have to spread their budgets even more thinly.”

More economic data: US industrial production rose 0.4% in March.

It was little changed in the first quarter, though, increasing at an annual rate of 0.2 percent.

The Federal Reserve reports that:

In March, manufacturing and mining output each fell 0.5%. The index for utilities jumped 8.4%, as the return to more seasonal weather after a mild February boosted the demand for heating.

Fed's Waller says inflation 'far above target', boosting dollar

The pound is now slipping back against the US dollar, after a Federal Reserve official has declared he was prepared to approve another interest-rate increase.

In a speech in San Antonio today, Fed governor Christopher Waller said that inflation remains “much too high”, meaning the job of tightening policy to subdue inflation is “not done”.

Waller says there are signs that economic activity moderated last month, but that lending conditions have not tightened enough despite the turmoil in the banking sector.

As such, Waller indicates that US interest rates need to be raised further, saying:

Because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further.

How much further will depend on incoming data on inflation, the real economy, and the extent of tightening credit conditions.

This has knocked the pound away from this morning’s 10-month highs. It’s now down half a cent today at $1.247.

Updated

US retail sales fall 1% in March

Just in: US retail sales fell by more than expected last month.

Retail sales dropped 1% in March, twice as large a fall as expected.

Spending at motor vehicle and parts dealers was down 1.6% month-on-month, while electronics spending dropped 2.1% in the month, and were 10.3% lower than last year.

Gasoline stations took 5.5% less than in February, reflecting a fall in gas prices.

That left retail sales 2.9% higher than in March 2022, though.

While retail trade sales were 1.5% higher than a year ago, there was a 12.3% jump in spending at online shops (“nonstore retailers”), while takings at food services and drinking places were up 13.0%.

Updated

Citigroup has also beat Wall Street expectations for profits in the last quarter.

Citi earned $1.86 per share in the first quarter, beating analysts’ average estimate of $1.67, according to Refinitiv data.

Citi, like JP Morgan, earned more from borrowers paying higher interest on loans, as it benefited from a tighter monetary policy by the Federal Reserve.

However, it set aside $241m in the quarter to cover potential loan losses against the backdrop of a slowing economy.

JP Morgan has got the bank reporting season off to a solid start, says Chris Beauchamp, Chief Market Analyst at IG Group.

With stocks having rallied hard from their March lows, investors will be watching for signs of weakness in earnings, and JPMorgan appears to have avoided any real bad news.

True, mortgage activity has slowed and bad loan provisions are up, but these are the kind of numbers bank investors want to see, and get earnings season off to a solid start.

Shares in European banks are rallying on the back of JP Morgan’s results.

Standard Chartered (+3.2%), HSBC (+2.79%) and Barclays (+2.6%) are leading the FTSE 100 risers.

The blue-chip stock index has now gained 46 points, or 0.6%, today to 7890 points, its highest in five weeks.

JP Morgan also benefited from rising interest rates.

Net interest income rose by 49% in the last quarter to $20.8bn.

UK banks have also profited from higher net interest margins - the gap between the rates they pay savers and charge borrowers.

Shares in JP Morgan have jumped almost 6% in premarket trading.

JP Morgan has beaten Wall Street forecasts by reporting earnings of $4.10 per share for the last quarter.

That’s up from $2.63 per share in the first quarter of 2022, and also beats the $3.57/share reported in the final quarter of last year.

With recession fears swirling, JP Morgan also set aside $2.3bn in the last quarter to cover credit losses.

It says:

The provision for credit losses was $2.3 billion, reflecting net charge-offs of $1.1 billion and a net reserve build of $1.1 billion.

The net reserve build included $726 million in Wholesale and $416 million in Consumer, largely driven by a deterioration in the weighted-average economic outlook, including updates to the Firm’s macroeconomic scenarios and an increased probability of a moderate recession due to tightening financial conditions.

JP Morgan’s Jamie Dimon also cites geopolitical tensions with China as a risk, saying:

We also continue to monitor for potentially higher inflation for longer (and thus higher interest rates), the inflationary impact of continued fiscal stimulus, the unprecedented quantitative tightening, and geopolitical tensions including relations with China and the unpredictable war in Ukraine.

While we hope these clouds will dissipate, the Firm is prepared for a broad range of outcomes, and we are confident that we can serve the needs of our customers and clients in all environments.”

Updated

JP Morgan net income jumps 52%.

The JP Morgan Bank logo is seen displayed on a mobile phone screen.

Just in: Banking giant JP Morgan has reported a 52% jump in earnings in the last quarter.

JP Morgan made net income of $12.6bn in the first quarter of this year, up from $8.28bn in Q1 2022.

That’s also an increase on the $11bn it made in the final three months of last year.

The banks consumer & community banking division had a good quarter, with combined debit and credit card sales up 10% and card loans up 21%.

Jamie Dimon, Chairman and CEO, says the bank reported “strong results” in the first quarter, including record revenue of $38.3bn.

Dimon says:

Our years of investment and innovation, vigilant risk and controls framework, and fortress balance sheet allowed us to produce these returns, and also act as a pillar of strength in the banking system and stand by our clients during a period of heightened volatility and uncertainty.”

Dimon added that the turmoil in the banking sector could lead to a slowdown in consumer spending:

“The U.S. economy continues to be on generally healthy footings —consumers are still spending and have strong balance sheets, and businesses are in good shape. However, the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks.

The banking situation is distinct from 2008 as it has involved far fewer financial players and fewer issues that need to be resolved, but financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending.

Last month Dimon led talks with the chiefs of other big banks about efforts to stabilize First Republic, the US regional bank which hit problems. These banks agreed to inject $30bn of deposits into First Republic.

Just in: Asda now joined the rush of milk price cuts, following Aldi and Lidl who cut prices to 90p per pint this morning, in line with their bigger rivals.

“Kris Comerford, Asda’s Chief Commercial Officer said;

“Our latest income tracker shows over 11m families in the UK don’t have enough income to cover their weekly expenses, which is why we have invested to protect our customers throughout the cost of living crisis – and have taken swift action to reduce the price of milk as commodity prices have eased.

This is on top of the hundreds of prices lowered in our stores every week.”

Inflation in France didn’t fall by as much as first thought last month.

The French Consumer Price Index (CPI) rose by 5.7% in March, according to the final report by the country’s statistical office INSEE published this morning.

That’s a drop compared with February’s 6.3%, due to an easing in energy prices, but a little higher than the preliminary estimate of 5.6%.

That leaves French inflation higher than in the US, where it fell to 5% last month. We get UK inflation data next week.

Boeing has revealed that deliveries of its bestselling 737 Max plane will be delayed, in the latest blow to the US manufacturer in its long recovery from a crisis started by the troubled model, my colleague Jasper Jolly writes.

The company said a “significant” number of 737 Max deliveries would be delayed because a supplier, Spirit AeroSystems, had made a component using a “non-standard” manufacturing process.

The problem is not an “immediate safety of flight issue” so planes already in service can continue to operate, Boeing said.

More here:

And some reaction:

Back in the precious metals market, gold is still trading near a record high.

Spot gold is changing hands at $2,037 per ounce, not far from the alltime peak of $2,069/ounce.

UK rail firms make new offer in bid to end strikes

Hopes are rising for a breakthrough to end some of the rail strikes that have hit UK, after train companies tabled a new offer to unions.

The Rail Delivery Group (RDG) says it has made a new offer to rail workers in a bid to end a long running dispute over pay

A spokesperson for the RDG, which reresents the rail industry, says:

“We have put forward a fair revised offer which makes important clarifications and reassurances, in particular around job terms and conditions for our employees,”

The RMT union says it is considering the new offer; an RMT spokesperson said:

“We have received an updated offer from the RDG and our NEC (national executive committee) is considering its contents.

“No decision on any next steps has been taken.”

A separate pay dispute with Network Rail, which owns and operates tracks and signalling infrastructure, was resolved last month after RMT members had voted to accept an improved pay offer.

Updated

Superdry and Dr Martens cut guidance

Two UK companies have hit shareholders with warnings on profits today.

Superdry, the fashion brand, withdrew its previous guidance that it would broadly break-even on a pre-tax profit basis. It blamed the cost of living crisis for hitting revenues, saying:

Retail sales in February and March, whilst showing significant year-on-year like-for-like growth, have not met our expectations.

This can partly be attributed to factors outside the Company’s control, including the cost-of-living crisis having a significant impact on spending and footfall, and poor weather resulting in less demand for our new spring-summer collection. These trends are consistent across both the UK and Europe

Superdry also revealed it is considering raising new funds, though a potential equity raise of up to 20% backed by founder and CEO Julian Dunkerton.

Footwear firm Dr Martens trimmed its forecast for EBITDA profits this year to around £245m, from £250m before. It blamed higher-than-expected costs at a new Los Angeles (LA) distribution centre.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, says:

Superdry continues its uphill battle with a profit downgrade, saying it no longer expects to be broadly breakeven this year. Sales have been rising, but at a slower pace than desired, or indeed needed. Full year revenue is also now expected to only nudge up around £6m. The group has said the cost-of-living crisis is holding performance back. There’s merit to that argument when you consider that middle-value fashion is the most vulnerable during difficult times, but there have also been execution-led failures with Superdry. The group is walking down the right path as it tries to achieve long-term cost savings through its store estate and logistics, but cost savings can only carry you so far. At some point organic demand needs to carry the mantle.

It’s bad news at Dr Martens too, where operational headaches at its Los Angeles distribution centre have seen earnings expectations downgraded to around £245m. Full year revenue was up 4% on a currency neutral basis, with wholesale performance acting as a drag. Ultimately, Dr Martens has a strong brand, but investors would like to see some further momentum on both the top and bottom line. The shares have fallen almost 70% since they listed in 2021, which was partly a function of a frothy valuation, but also raises questions about the long-term growth trajectory for the famous shoe brand

Britons hit the high street last week during the Easter break, and spent more on eating out too, new data from the Office for National Statistics shows.

The ONS reports that debit card spending on “pubs, restaurants and fast food” increased by 17 percentage points from the previous week, meanwhile UK high street footfall was 113% of the level of last week.

The report also found a pick-up in activity at UK companies, another indication that recession fears are ebbing:

One in five (20%) trading businesses reported that turnover had increased in March 2023 compared with the previous calendar month, the highest proportion since the introduction of this question in March 2022.

Firms also lifted their online job adverts by 1%, but the total was 18% lower than a year ago.

Aldi and Lidl join rush to cut milk prices

Aldi and Lidl have cut the price of milk to match Tesco and Sainsbury’s as the annual ‘spring flush’ rise in production leads to oversupply.

The price cuts are the first since 2020 as rises in energy, fertiliser and feed prices have led to a surge in the price of milk since then.

Aldi and Lidl both said they would now charge 90p per pint, in line with their bigger rivals, down from 95p.

We reported yesterday that industry insiders said large wholesalers have cut their prices by an unprecedented 5p a litre as the “spring flush” – when cows naturally tend to produce more milk as they are let out into fields – had led to oversupply.

The UK’s FTSE 100 index has risen a little this morning, to its highest since 10th March.

The Footsie is up 18 points, or 0.23%, at 7861 points. Packaging firm Smurfit Kappa is leading the risers, up 1.5%, after Citigroup raised its price target.

Asia-Pacific focused bank Standard Chartered are up 1.5%.

Shares in AO World, the online electrical retailer, have jumped 11% this morning after it raise its profit guidance.

AO World forecast its annual profit will be around the top end of its estimates, as cost-cutting measures pushed up its margins.

John Roberts, CEO and Founder, told shareholders that AO was “encouraged by the work undertaken to pivot the business during the financial year 2023”.

We anticipate that our progress in improving both operational cost efficiencies and margin in FY23 will continue through the next 12 months and beyond.”

AO World’s shares hit 75.25p, the highest since the end of February. But they’re still a long way below their pandemic highs above £4, when the company benefitted from the surge in home shopping and demand for electrical goods such as games consoles.

Dechra shares surge 35% after takeover approach

Shares in pet drugs firm Dechra Pharmaceuticals have surged 35% this morning, after it revealed it is in takeover talks with Swedish investment firm EQT.

FTSE 250-listed Dechra told the City last night that it had entered into discussions with EQT over a possible all-cash recommended offer, worth 4,070p. That would value Dechra at around £4.6bn.

Shares in Dechra have jumped by over a third this morning, to around 3800p, a one-year high.

The share price of Dechra Pharmaceuticals
The share price of Dechra Pharmaceuticals Photograph: Refinitiv

Dechra, which sells medicines to vets, has benefitted from the jump in pet-ownership during the pandemic.

Victoria Scholar, interactive investor’s head of investment, tells us:

Dechra fared extremely well during the pet boom during the pandemic as a strong stay-at-home stock. However it has struggled since, issuing a profit warning in February, citing unpredictable trading conditions.

Although shares in Dechra are soaring today on the M&A speculation, the stock is not fully pricing in the all-cash off suggesting there is still some uncertainty about whether the deal will actually cross the line. Before today’s surge, shares had fallen sharply over the last year from 3,822p in April 2022 to 2800p by Thursday’s close.”

Dechra could now join the list of companies which have fallen to foreign buyers since the pound’s slump in 2016 after the Brexit referendum, which made UK companies cheaper to buy.

Over the last seven years, chipmaker ARM, supermarket chain Morrisons, security firm G4S and aerospace and defence engineering group Meggitt have all been acquired, for example.

Pound on track for fifth weekly gain against the dollar

The pound is on track for its fifth weekly again against the US dollar in a row.

It has gained almost one cent this week, having also risen in the previous four weeks.

That would be its best run against the greenback in over two years (since January and February 2021).

A chart showing weekly moves in the pound this year
A chart showing weekly moves in the pound this year Photograph: Refinitiv

Victoria Scholar, head of investment at interactive investor, tells us:

“The pound has hit a 10-month high against the US dollar while EUR/USD has rallied to the highest level since April 2022.

Cable (GBP/USD) is up over 3.6% year-to-date and is up over 12% in 6 months since the fiscal fiasco around the mini-budget last September which heavily punished the British currency.

Since the lows, the pound has been steadily regaining ground while the US dollar depreciates as traders price in the growing expectation that we are near the peak of the Fed’s rate hiking cycle. After last year’s bull run for the greenback driven by aggressive monetary tightening in the US, 2023 has seen King Dollar lose its crown with the euro and the pound appreciating significantly against it.

However there is still a long way to go to revisit the levels of dollar weakness seen at the end of 2020 and the beginning of 2021.”

Singapore’s central bank has signalled that growth prospects in the city-state have weakened, as it left interest rates on hold today.

The Monetary Authority of Singapore warned that the country’s gross domestic product is expected to “moderate significantly” this year, and that prospects for growth this year have “dimmed.”

That’s significant, given Singapore was one of the first central banks to start tightening policy to fight inflation in the current cycle, back in 2021.

MAS left interest rates unchanged today, as data showed the Singapore economy shrank by 0.7% in the first quarter of this year.

It also warned that the electronics sector has weakened, saying:

Global economic activity was somewhat more resilient than expected in Q1 2023. This reflected the fall in global energy prices, strong consumption demand in the advanced economies, and the lifting of pandemic restrictions in China.

However, the global electronics industry, which has significant production and trade linkages across the region, is in a sharp downturn.

Figures yesterday showing a rise in US jobless claims last week has also weakened the dollar.

Initial unemployment claims rose by 11,000 to 239,000 in the week to April 8, the first rise in three weeks, suggesting the US economy is losing momentum.

Alexander Zumpfe, a precious metals dealer at Heraeus, said:

“These economic data have reinforced the market’s assessment that the cycle of interest rate hikes is nearing its end, which makes gold attractive to investors as it does not pay interest itself.”

Gold and silver prices are rising

Gold bullion
Gold bullion Photograph: Royal Mint/PA

Precious metals prices are also rising, on the back of the weaker US dollar.

Gold is inching towards its record high, while the silver price has hit a one-year high.

Gold is on track for its second weekly gain in a row, with the weaker US dollar nudging up its price.

Matt Simpson, a senior market analyst at City Index, says:

“The appetite to sell the U.S. dollar in the wake of soft inflation data, lower yields and calls for a lower terminal Fed rate have been a huge driver for gold.”

Deutsche Bank analyst Jim Reid explains that the possibility of America’s central bank ending its interest rate increases soon are pushing up both metals. He told clients this morning:

Elsewhere yesterday, another asset class that benefited from the prospect of a pause in the Fed’s rate hikes were precious metals.

For instance, gold prices (+1.26%) climbed to their highest level in over a year, closing at $2,040/oz, which leaves it just short of its all-time high in nominal terms, when it hit an intraday level of $2,075/oz back in August 2020.

Overnight it’s risen a further +0.13% to $2,043/oz.

In the meantime, silver (+1.28%) was also at its highest level in nearly a year, hitting $25.82/oz by the close, and overnight it’s risen a further +0.63% to $25.99/oz, which would leave it at a one-year closing high.

Updated

The euro is also trading at a one-year high against the dollar.

The single currency strengthened after US producer prices unexpectedly fell in March, boosting expectations that the Federal Reserve is near the end of its rate hiking cycle.

Introduction: Pound hits 10-month high against US dollar

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The pound has climbed to a 10-month high against the US dollar, as signs build that inflationary pressures in America are easing.

Sterling hit $1.2546 this morning, the highest since last June, as the dollar dropped on the foreign exchange markets on hopes that the US Federal Reserve could stop lifting interest rates soon.

The pound has staged quite a recovery since its nadir last September, when it fell to a record low against the dollar after the mini-budget fiasco. It picked up as Jeremy Hunt tore up much of his predecessor, Kwasi Kwarteng’s, plans for unfunded tax cuts last autumn.

Chancellor Hunt has sounded upbeat about the economy’s prospects despite the UK recording no growth in February, during his trip to Washington DC for the IMF’s Spring Meeting.

He told reporters:

“The IMF have undershot on the UK economy for quite a long time.

“It has undershot in every year bar one since 2016. It is one of many forecasters.”

Hunt also said the UK government was willing to accept short-term damage to the economy from public sector strikes, rather than give in to pay demands and risk a longer-term hit from persistently higher inflation.

The pound’s rally shows the City is shrugging off the International Monetary Fund’s prediction that the UK will be the worst-performing advanced economy this year.

Instead, investors are focused on data showing that America’s inflationary surge could be fading.

Yesterday, the US producer price index for final demand unexpectedly fell by 0.5% in March, showing a slowdown in the prices being passed onto consumers. And on Wednesday, US consumer price inflation slowed to a near two-year low of 5%.

Fawad Razaqzada, market analyst at City Index and FOREX.com, says:

The US dollar continued to weaken on Thursday, mostly against currencies where the central bank still remains hawkish, or the economic backdrop is improving.

The dollar has come under renewed pressure after more signs emerged that inflation has peaked. Traders are thus betting that the Fed will stop hiking interest rates, and soon it may even start loosening its policy again.

We will have more US data in the form of retail sales and consumer confidence on Friday.

European stock markets are set for a positive start this morning:

The agenda

  • 7.45am BST: French inflation rate for March

  • 9am BST: IEA’s monthly oil market report

  • 1.30pm BST: US retail sales for March

  • 2.15pm BST: US industrial production for February

  • 3pm BST: University of Michigan’s index of US consumer sentiment for April

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