Key events
Closing summary: Sterling slides as US dollar regains ground
The tale of the pound’s tricky month is of course the other side of dollar strength – something of a turnaround after a period of notable falls in the value of the greenback.
The dollar had declined as investors questioned the attractiveness of US assets under Donald Trump when he was committed to trade wars. Trump has gone ahead with tariffs on most of the US’s imports, but he has not quite followed through with the worst of his threats in recent weeks.
Allied to that, the US Federal Reserve has signalled that it is cautious about cutting interest rates, as it is worried about the inflationary pressure coming from tariffs. That has made the dollar relatively more attractive.
Jonas Goltermann, deputy chief markets economist at Capital Economics, a consultancy, said:
Judging by yesterday’s policy announcement and Chair Powell’s press conference remarks, the FOMC doesn’t look to be in a hurry to change its policy stance. That points to somewhat higher Treasury yields and a flatter yield curve. It also supports our view that the dollar will continue to rebound.
Victoria Scholar, head of investment, interactive investor, an investment platform said:
The first half of the year was characterised by a clear uptrend for cable (GBP/USD) but since the start of July, that trade has reversed course with significant sterling selling and dollar buying. Over the past month, the pound has lost about 3.75% against the US dollar.
In other business news today:
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Thank you for reading as ever. Please do join Graeme Wearden tomorrow to round out the business week. JJ
Phillip Inman, the Guardian’s senior economics writer, was at the launch of the UK government’s small business strategy in Swindon this morning, where Keir Starmer and business secretary Jonathan Reynolds said they would bring in legislation to tackle late payments by large firms.
The pledge of new laws giving extra powers to a small business commissioner was welcomed by the Federation of Small Businesses.
FSB boss Tina McKenzie said she was especially pleased by proposed rules that will force companies to publish a payment policy. The new rules would also impose interest charges automatically on those companies that delay payments by more than 45 days.
The event, also attended by transport secretary Heidi Alexander, brought together a range of businesses from Swindon. Starmer said:
We said to them, all the challenges you face, all the inhibitors, this is a plan to deal with them.
Large business lobby groups are expected to push back against rules forcing their audit committees to design a late payment policy that stays within a new 45-day limit. Interest payments on invoices that are left lying around are also likely to upset large businesses.
Big companies are those with 250 employees or more
Microsoft hits $4 trillion market value
Microsoft has become the second publicly traded company to reach a $4 trillion market value, after it last night published a bumper set of financial results fuelled by the AI boom.
The US technology company’s share price rose by 6% at the start of trading on Thursday, taking it past the $4 trillion mark. Chip company Nvidia was the first to reach the milestone earlier this month.
Microsoft had reported a huge programme of investment in artificial intelligence, plus huge sales in the Azure cloud business (whatever UK regulators might think about that).
Dan Ives, an analyst at Wedbush Securities, an investment bank, who is extremely bullish about the prospects for AI companies, said:
The poster children for the AI revolution are led by Nvidia and Microsoft as both are foundational pieces of building on the biggest tech trend we have seen in our 25 years covering tech stocks on the Street.
US core inflation rose in June, according to Fed’s favourite measure
US core inflation rose in June, according to figures that are closely watched by the Federal Reserve – and that will likely bolster its determination to resist intense pressure from Donald Trump to lower interest rates.
The core personal consumption expenditures (PCE) index rose by 0.3% month-on-month in June, up from 0.2% in May, according to the US Bureau of Economic Analysis.
The core PCE reading was in line with economists’ expectations, but it adds to evidence of inflationary pressure in the US economy. That is exactly the sort of thing that Jerome Powell, the Federal Reserve’s chair, is watching out for.
Powell last night said that Trump’s tariffs will likely result in higher prices. He was announcing an interest rate hold by the Fed, despite Trump’s wishes. Powell said:
Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen.
Scott Bessent also told CNBC on Thursday that he is pulling together a list of potential candidates to lead the US Federal Reserve and that he expects an announcement by the end of the year.
Bessent insisted:
“We are putting together a very good list of candidates.”
Donald Trump’s eagerness to replace current Fed chair Jerome Powell may have increased since the Fed left interest rates on hold last night.
Powell’s term expires next May.
Update: Trump has lashed out (again) at Powell, posting on Truth Social:
Jerome “Too Late” Powell has done it again!!! He is TOO LATE, and actually, TOO ANGRY, TOO STUPID, & TOO POLITICAL, to have the job of Fed Chair. He is costing our Country TRILLIONS OF DOLLARS, in addition to one of the most incompetent, or corrupt, renovations of a building(s) in the history of construction! Put another way,“Too Late” is a TOTAL LOSER, and our Country is paying the price!
Lisa O’Carroll
EU exports of wines and spirits will face a 15% tariff from tomorrow after an exemption failed to be agreed ahead of 1 August, Donald Trump’s deadline for trade deals.
The move is a setback for wine makers in France, Spain and Italy and elsewhere along with the Irish whiskey sector which relies heavily on the US for sales.
European Commission officials said they are continuing to negotiate carve outs for wine and spirits and for steel but talks were ongoing.
Trade spokesperson Olof Gill said”:
“The Commission remains determined to achieve and secure the maximum carve outs, including for traditional EU products such as wine and spirits. It is not our expectation that wine and spirits will be included in the first group announced by the US tomorrow, therefore those products will be captured by the 15 per cent ceiling.”
The deal between Washington and Brussels agreed a ceiling of 15% tariff for most EU imports with some exemptions in both directions including aviation and aircraft parts and some non-sensitive agricultural produce such as nuts and petfood.
“EU and US negotiators are as agreed, working to finalise the joint statement, building on the agreement reached. We will communicate more precise timings to you when these are known in the event more time is required to finalise the joint statement beyond August 1,” said Gill.
With negotiations on the detailed list of exemptions ongoing, doubts have been raised that the expected joint statement will not be signed off ahead of tomorrow’s deadline. The EU however expects the US to press ahead with its side of the deal, likely to be through an executive order, given it has already published the headline deal.
He added:
“It is the clear understanding of the European Union that the US will implement the agreed across -the-board tariff ceiling of 15%. It is also our clear understanding that the US will implement the exemptions to the 15% ceiling, as outlined by President von der Leyen last Sunday.”
Gill pointed out that the joint statement is not a legally binding text and more of a “roadmap”.
The car sector is the most immediate beneficiary as it was facing import duties of 27.5%. But pharmaceuticals had been rated at zero tax under a long standing World Trade Organization agreement centred on keep costs of medicines down globally.
‘Shame on them’: bank boss on rivals ditching climate commitments
Kalyeena Makortoff
Standard Chartered chief executive Bill Winters has condemned rival banks who have dropped their climate commitments amid mounting political pressure.
Winters told journalists on Thursday that many people were jumping on the climate bandwagon when it was “fashionable” but have since retreated:
Shame on them.
It comes weeks after HSBC became the first UK bank to leave the global banking industry’s Net Zero Banking Alliance, in a fresh blow to international climate coordination efforts. HSBC’s decision followed a wave of exits by big US banks in the run-up to Donald Trump’s inauguration in January, with the US president’s second term sparking a climate backlash as he pushed for higher production of oil and gas.
HSBC had been one of the NZBA’s founding members in 2021, with its former chief executive Noel Quinn saying that the time that “Industry-wide collaboration is essential” to monitoring progress” towards net zero carbon-emission targets.
When asked on Thursday what he thought of rivals backtracking on their commitments globally, Winters said:
People that said a lot of stuff, but it was fashionable to say it, who are saying either nothing or the opposite now: shame on them.
Winters said that most of StanChart’s own clients, from across China, India, wider Asia and the Middle East, were: “as focused on their net zero transitions, or their transitions to low carbon economy as they were before. And that obviously is good for business.”
He added:
A lot of these projects just makes sense economically, and many corporations continue, I say most, continue to honour the obligations that they made to their shareholders or other stakeholders early on. Independent of political noise one way or the other.
Treasury Secretary Bessent : ‘we have the makings of a deal’ with China
Graeme Wearden
US Treasury Secretary Scott Bessent has declared that the US and China have made good progress towards agreeing a trade pact.
Speaking to CNBC today, Bessent says:
“I believe that we have the makings of a deal.
There’s still a few technical details to be worked out on the Chinese side between us. I’m confident that it will be done, but it’s not 100% done.”
Bessent did not provide any details on what a final deal with China would look like, adding:
“The Chinese are tough negotiators. We’re tough, too.”
The US and China have until August 12 to come to an agreement. Under their curent truce, the US imposes a 30% tariff on Chinese imports, while Beijing charges a 10% levy on goods from America.
Pound on track for wost month in nearly two years
Graeme Wearden
July has been a bruising month for the British pound.
Sterling has fallen by 3.6% against the US dollar in the last month, its worst performance since September 2023 when it lost 3.7%.
It’s nearly as bad as the 4% tumble in September 2022, when panic over Liz Truss’s mini-budget send sterling sliding to a brief record low against the dollar.
The US dollar has been rallying through July (after its worth first half to a year since 1973), helped by optimism after Donald Trump secured a few trade deals ahead of tomorrow’s deadline. Economic data has suggested the US economy is holding up well, which led the Federal Reserve to leave interest rates on hold last night.
The Bank of England, in contrast, is expected to cut UK interest rates next week to 4%, from 4.25% at present.
The pound has also lost a little ground against the euro this month, down 0.7% against the single currency to around €1.156.
Analysts at Oxford Economics say they see sterling “trading lower”, telling clients:
Fiscal concerns will remain in the foreground, undermining the ability of relatively elevated rates to sustain the pound.
UK regulators warn over car finance claims management companies
Rupert Jones
With a legal ruling on the car finance scandal looming, regulators have today fired a sizeable warning shot at claims management companies and law firms over “poor practices” that risk leaving people misled or out of pocket.
This is a boom time for firms offering to help people make a claim for car finance compensation in return for a cut of any proceeds – but the Financial Conduct Authority (FCA) and the Solicitors Regulation Authority (SRA) said they were becoming increasingly concerned about the conduct of some of the firms touting for business.
They have taken action against scores of firms already.
Adverts claiming consumers could be entitled to thousands of pounds in compensation and urging them to act now are all over the internet and people’s social media feeds.
With a major supreme court judgment due tomorrow (Friday) at 4.35pm, and the possibility of a free FCA compensation scheme being introduced, the regulators said they were stepping in to protect consumers and warn firms they must comply with the rules on how motor finance claims should be handled.
This scandal has been rumbling on for some time and involves the alleged large-scale mis-selling of car loans and the payment of secret commissions to car dealers, resulting in millions of new and second-hand vehicle buyers unknowingly paying more for their finance than they should have.
A court of appeal ruling last autumn sent shockwaves through the financial sector as it suggested that anyone with any type of car finance which included commission that was not properly disclosed could potentially be owed redress. It has been said that the scandal could result in a £44bn bill for lenders.
The supreme court will give its verdict tomorrow, and the FCA has said that if, following the judgment, it concludes that consumers have lost out, it is likely it will consult on an industry-wide consumer compensation scheme.
Over the last year the FCA has required 224 motor finance commission promotions to be amended or withdrawn, while the SRA currently has 89 live investigations into 73 law firms, linked to potential breaches of its rules.
The issues identified include:
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Some firms are failing to tell clients about free alternatives before signing them up.
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Marketing materials that are making bold, and sometimes misleading, claims about the size of potential payouts.
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Fee structures that in some cases could strip up to 30% from any redress a consumer receives.
Paul Philip, chief executive of the SRA, said
We are very concerned about some of the practices we are seeing… Where we find cases where firms are not acting in the best interest of their clients, we will investigate and take action.
