The pound remained stable against the euro yesterday, holding onto the significant gains it has made in the past week. Less positively against the US dollar, GBP/USD slipped by around 0.6%.
There was little to excite the markets yesterday, with the headline reading being Germany’s balance of trade, more positive than expected at €17.8bn, as both imports and exports tumbled, but more so the imports, by 1.2% from the previous month.
There were plenty of other interesting things in the market, however. The price of gold reached an all-time high and Bitcoin an 18-month high of $42,000. Both have been bolstered by the promise of interest rate cuts from the US Federal Reserve. These are assets that typically do well when the Fed cuts rates, especially as yields on US Treasuries are falling.
Later today we will have a final result for S&P services PMI in the UK and across the eurozone too. Yesterday two leading UK think-tanks, the Centre for Economic Performance and the Resolution Foundation, suggested that the UK should be capitalising more on its strength as a superpower in the services sectors such as finance, education, the arts and architecture, to raise living standards in line with the rest of the G7.
The backdrop to currency movements as we reach the end of the year is economic performance and the promise – now almost priced in according to some reports – of a rate cut in March from the European Central Bank (ECB). One of the ECB’s traditionally most hawkish members, Isabel Schabel, said that rate increases were off the table, with inflation having fallen from over 10% to 2.4% within a year. She quoted Keynes in saying: “When the facts change, I change my mind. What do you do, sir?”
This morning we have seen disappointing (for retailers) data from British high streets and online retailers, with growth of 2.7% in November well below inflation and what might be expected ahead of Christmas.
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