Currency markets are increasingly confident that 2025 will end with quarter-point interest rate cuts on both sides of the Atlantic. Sterling and the US dollar are both struggling to pick up momentum ahead of imminent Bank of England and Federal Reserve meetings and a long list of lingering risks.
One week after the autumn Budget, recriminations around the Office for Budget Responsibility’s (OBR) accidental early release of its fiscal report are still rumbling on. Mercifully for the OBR, the hiccup that ultimately cost chief Richard Hughes his job was not raised by MPs during its appearance before a parliamentary committee.
In fact, there appeared a sincere effort to close ranks to end the tedious blame game. One senior official claimed the chancellor had not deliberately misled the public and financial markets over the state of public finances, shutting down one angle of intense media scrutiny.
Ironically, both the pound and the UK seem to be in a better place after last week. Yesterday morning brought news that house prices increased by more than expected (1.8% vs 1.7% annualised) in November. Alongside the promise of seasonal consumer spending and lower interest rates, businesses and households alike are beginning to prepare for a more upbeat end to year.
Global bond markets stabilised yesterday after rumblings of an interest rate hike in Tokyo gave Japan’s bonds a winter cold to pass across the world. UK and US bond yields were becalmed, easing the risk of government spending overshooting forecasts.
UK pension funds joined the Bank of England in expressing scepticism over AI stocks. After the Bank’s warning that rocketing valuations could cause a “sharp correction”, pension funds have reportedly significantly decreased their allocations to the US tech sector in an effort to shield investors.
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