Chancellor Reeves
Market observers were no better informed at the end of the Rachel Reeves speech than they were at the outset yesterday morning. The only surprise was that having comprehensively floated options in the past two months for inclusion in her November 26 Autumn Statement, that the Chancellor should have elected to speak at 08:10 hrs GMT, just over 3 weeks in advance of the Statement. The hint that there would be no market moving news was in the timing: 08:10 hrs i.e. after the markets had opened. In the event RR blamed her predecessor government and simply said what is palpably obvious: she faces the choices of economic irresponsibility or going back on her government’s election promises. What was not said but is clearly on her mind, risking economic irresponsibility would please her MP colleagues but would not be tolerated by the markets and buyers of UK government debt. A few limp questions all focused on the Chancellor reneging on her promises over not raising taxes and she was off to polish up her speech for November 26 and the inevitable tax rises that it will contain. Positively, UK Gilt yields fell a little as did Sterling but rather more.
GBP/USD 1.3035.
European Demographics
2026 marks the year according to Eurostat when the EU population will peak at 453 million. After that the EU labour force is set to fall by 1 million workers per year every year for the next 25 years. By 2100, a mere 75 years away the EU population will fall by 34% unless there is net migration. Italy and Spain are the two countries most affected with the forecasts saying that they will decline by more than 50% in the size of their populations. That reduction in the EU population and therefore its labour force has serious long term implications for the prosperity for its citizens going forward. At least Bulgaria is joining the EU bloc on January 1, bringing in 6 million new citizens.
GBP/EUR 1.1355.