There was little movement for sterling yesterday, and what there was, was mixed, drifting slightly against the euro but building against the US dollar.
It was a tale of interest rates again. Governor of the Bank of England (BoE) Andrew Bailey agreed in an interview yesterday that four quarter-point interest rate cuts were likely in 2025. The OECD had said earlier that the UK was likely to need to maintain interest rates higher for longer than the US or EU.
This morning the Halifax has revealed a sharp rise in property prices. They rose 1.3% in November, against an expectation of 0.2%. This is close to the highest monthly increase in five years and takes the annual increase to 4.8%.
Back with currencies, the Australian dollar (AUD), weakened by between 0.5% and 2% against most pairings, following poor Gross Domestic Product (GDP) data that shows an underpowered economy.
No surprise that the South Korean won has also been a big loser, in a week when martial law was, briefly, declared. KRW has lost 8.5% to the pound in the past year, and 2% in the past week.
Stock exchanges have seen a clear example of a ‘Santa rally’, which may also have fuelled the pound’s strong showing – as GBP tends to rise with stock markets. The FTSE 100 is around 2.25% stronger than a month ago.
One improvement in the UK’s business outlook came from the S&P Construction PMI, which was upgraded to 55.2 yesterday. However, the high number is based on strong commercial growth and disguised a decline in residential building – the only sector in decline.
Right on cue, riding in like the 7th Cavalry to save the day, yesterday UK prime minister Sir Keir Starmer launched a Plan for Change, with six targets to hit by 2029. These include building 1.5 million homes via faster-tracked planning. The prime minister promised to take on the NIMBYs, saying that housebuilding was being “held to ransom” by “blockers and bureaucrats”. He said that the planning system is “a blockage in our economy that is so big, it obscures an entire future.”
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