Daily Brief – British Pound

British Pound

News that Chancellor Reeves had abandoned her controversial and politically charged plans to raise UK Income Tax on Friday morning sent the British Pound lower by lunchtime, however, Sterling recovered from most of that fall later on Friday. The reason given for the change of tack on Income Tax rises was that economic forecasts had improved. It smacked more of panic before crisis driven by political expediency. The main takeaway from the falls in Equity markets, the political currents swirling around Westminster, the forthcoming Autumn Statement and the paradox of a Government with a thumping majority but looking down the barrel of disastrous council elections in May of next year is that the UK markets, and especially Sterling, is set for a volatile month ahead. Time to buckle up and put some protection in place against a potentially much lower British Pound in the near future. The old saw was that ahead of the Smithfield Market at the end of November when farmers drove their cattle for sale to Smithfield, UK markets rallied on the prospect of those farmers being flush with cash, and buying Shares and Government Stocks. Smithfield is not what it was and in any case is scheduled for closure in 2028. Oh dear.

GBP/USD 1.3157.

Swiss Franc and USD

Friday saw the flight to safety trade of buying CHF which stands now at a 10 year high versus EUR. The other currency that benefitted was JPY but to a lesser degree. As for GBP and USD, they were lower in all the maelstrom from UK politics and the return of the US Government after the longest shut down in history. Sentiment has swung in the course of just one trading session from optimism on a December US rate cut to less than a 50% chance of one happening. Meanwhile, the Swiss Franc benefits with the USD a further 0.4% down.

EUR/USD 1.1612.

Challenges for Businesses in Europe

This was the salient part of a very long title that I shall spare you of a webinar on Thursday last week arranged by the German British Chamber of Commerce that we attended. Apart from some generically gloomy German viewpoints, the key takeaways for the US mid term elections next year are as follows: the elections will be about how POTUS and the Republicans are doing rather than the Democrats; energy costs are uppermost in US minds and anything Green/Eco related are mostly ignored as it’s not a priority for voters; in the eyes of the US administration and especially POTUS and VP Vance, the EU is still a supplicant and has much to redeem in the eyes of the USA; the POTUS view is that the EU has to choose for its principal trading relationship between the USA and China. The opportunities for the EU were more elusive in the near term and were in the opinions of the panellists, mostly unattainable. Longer term, the EU should aspire to forge a trans Atlantic trading alliance with the USA and it should seek to work with the US on reducing the world’s dependence on China for rare earths. Unarguable but still aspirational.

EUR/GBP 0.8826.

Simpsons Tavern, City of London

If there are any overweight middle aged beer swilling, steak eating pie loving men, who still lunch for a couple of hours in the Square Mile, then Cloth the excellent Smithfield restaurant that has finally inked a deal to take over Simpsons Tavern will be quids in. Cloth have promised to uphold the traditional menu items that used to be beloved by Simpsons’ loyal clientele. Hardly 2026, but at least it marks the preservation of one of the City’s great traditions. Stewed cheese and a large Southampton anybody?

 EUR/JPY 179.59.

2 Become 1

This day in 1996 the phenomenon that was/is The Spice Girls went to Number 1 in the album charts with their eponymous album Spice. There were no less than 5 hit singles on the album including this one and one other that went to Number 1 in no less than 53 countries. It’s not exactly great in the lyrics department but it is definitely great in the sphere of commercial success.

Candlelight and soul forever
A dream of you and me together
Say you believe it
Say you believe it

Free your mind of doubt and danger
Be for real, don’t be a stranger
We can achieve it
We can achieve it

Come a little bit closer, baby
Get it on, get it on
‘Cause tonight is the night
When two become one

I need some love
Like I’ve never needed love before (Wanna make love to ya, baby)
I had a little love
Now I’m back for more (Wanna make love to ya, baby)
Set your spirit free
It’s the only way to be

Silly games that you were playin’
Empty words we both were sayin’
Let’s work it out, boy

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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