Sterling starts the week up on the euro and close to its best since March 2022. GBP/USD remains some 4% down on its September high but having enjoyed two weeks of improvement.
While political turmoil has been grabbing the headlines from Seoul to Paris via Syria, the traditional benefits from chaotic regime change that go to the safe-haven US dollar appear to have been muted, with the dollar index slightly down this week.
We are entering a period of interest rate decisions and it is already having an impact. The Australian dollar has been severely on the backfoot as mood turns towards an interest rate cut, although that remains in doubt, as it does for the pound next week, with most predictions for rate cuts delayed to next year.
The European Central Bank (ECB) will be making its interest rate decision this week, with a further cut expected, while bets have recently risen that the US Federal Reserve may cut again next week. The US inflation data coming out on Wednesday could help determine that.
Last week finished with US Non-Farm Payrolls and 227,000 new private sector jobs added in November. However, following the extremely low number last month (36,000) it is hard to put too much stock into this bounce back.
Speaking of jobs, in the UK a report from KPMG and the Recruitment and Employers Confederation has found the weakest pre-Christmas demand for jobs since the pandemic four years ago. It is being blamed squarely on the rises in employee costs arising from the budget on 31 October. Their findings were backed up by recruitment firm Indeed, which found seasonal jobs 39% down on last year and 46% down on 2019.
Today, the chancellor Rachel Reeves will be the first British chancellor to address the Eurogroup of finance ministers since Brexit. She will promise to work more closely with Europe, saying: “A mature, business-like relationship… is about improving both our growth prospects.”
In France, following the government’s loss in a no confidence vote, President Macron’s refusal to resign and Marine Le Pen saying that her party might support a slower series of cuts to France’s budget deficit has helped to bolster the euro.
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