Out for a penny, out for the Pound:
The Pound faced another day of horrors losing as much one half of one percent on a trade weighted basis versus its peers. Following the most generous budget for 10 years, investors have confirmed their sentiment that Brexit is all that matters now. With the deadline to officially leave the European Union, whether following a transitional deal or hard break, less than five months away, the Pound’s misery and sell-off is unsurprising. The Dollar has managed to secure a mildly stronger footing today, closing the day’s European trading more than 0.1% stronger. The trade weighted Dollar Spot Index is once again approaching a value of 97, creating a technically challenging double peak that could generate a headwind for the greenback’s appreciation. With mid-term elections in the United States swinging towards the Democratic Party, traders are growing increasingly concerned about the propensity for Trump’s damaging rhetoric to rear its head. Cuts to taxation have already supported the Dollar by raising the expectations for further rate hikes because increased spending and consumption should be thought to add to inflationary pressures. Over the past few days the Rand has appeared to decouple from its traditional negative correlation with the Dollar. The destabilisation of the traditionally strong and negative correlation is likely due to the anticipation of Moody’s forthcoming rating on South African debt. Given Moody’s negative guidance following Nene’s medium-term budget policy statement last week, there is considerable risk priced into Rand crosses.
Discussion and Analysis by Charles Porter
UK Economic Growth 2025 The range is from 0.5% to 1.6%. Funnily enough, and not sure what conclusions one can draw from this, the four most pessimistic forecasts are all banks – Nomura, UBS, NatWest and Barclays who lead the downbeat group at 0.5%. At the other end of the scale the acronym heavy ICAEW, […]
UK Employment At 75.1%, employment for people aged 16-64 looks sort of OK depending on what that really means, but it does not alter the fact that there are currently 1.55 million people who are unemployed, or 4.4% of the potential workforce. Another much more significant number, is that there are currently 9.27 million people […]
Eastern Europe and Central Asia Between 2010 and 2019 economic growth in this large geographic area averaged 4%. According to the World Bank, that growth will decelerate to 2.5% for the next 2 years and even stripping out Russia that will still be lower at 3.3%. Inflation, weak external demand from the EU, global uncertainty […]