Despite something of a fall overnight, sterling survived the first 36 hours after the Budget not just unscathed but at least 1% up on the start of the month against most pairs. The gains on the euro and USD were smaller, but still took GBP to a four-week high.
A Budget can often fall apart in the days after – as happened to the ‘omni-shambles’ Budget of 2012 and the mini-Budget of 2022 – but Reeves can be satisfied by the market reaction so far.
Monday will see us into December, and thoughts are now turning to interest rates once again, with the US Federal Reserve deciding theirs next week and the Bank of England (BoE) on 18 December. Both probably have a rate cut on the cards; a move that would normally be negative for their currencies but may already be priced in.
At the Fed we’re nearing the end of Jerome Powell’s chairmanship and President Trump will be aiming to get a replacement who is more amenable to rate cuts (doveish, as they say). The dollar is likely to react to the news – and even to just the rumours. Current favourite is Kevin Hassett – known to be allied to Trump’s thinking on rates – and this has weakened the dollar over the past week.
We are just getting the preliminary eurozone inflation figures for November. France’s remains at just 0.9% annually – good news for those triple-locked Brits retired there on a 4.8% pension upgrade in April. Spain, with the fastest growing economy in western Europe is at 3%.
Overnight we heard the worst October numbers for UK car production since 1952, but this can be blamed on the Jaguar Land Rover cyber-attack. More worrying for the UK long-term appears to be the ‘brain drain’ of young Brits looking for a new life overseas, with net emigration of 52,000 25- to 34-year-olds.
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