Last night, the Federal Reserve ignored Trump’s pleas and hiked interest rates for the ninth time since late 2015. The central bank’s move was expected and so the currency markets were fairly muted in response, but it was a different story for the stock markets. The Dow Jones industrial average dropped 70 points following the announcement to finish the day down by 1.49%. As it stands, US stocks are on course for their worse December since 1931 during the Great Depression.
Each of the four rate hikes this year have been approved on a unanimous vote and Chair Jerome Powell felt moved to defend the independence of the central bank. “Political considerations play no role whatsoever in the Fed’s decision,” said Powell. He added that the decisions were based on economic data and that nothing will cause them to deviate from that.
There was, as ever, plenty of Brexit-related news, as prime minister’s questions caused plenty of fireworks. Theresa May repeatedly responded to concerns over the prospect of a no-deal Brexit by saying “To avoid a no-deal Brexit, you must support my proposals.” Suggestions that May is delaying the vote until the last possible moment to present MPs with a choice of voting for her deal or risking exiting the European Union without a deal are becoming more founded with each passing day.
Let us remember this: May postponed the initial meaningful vote because she knew it would be heavily defeated by MPs from all parties. She then travelled to Europe to try and gain assurances that have not been forthcoming. EU27 leaders have made their position clear and there will be no renegotiation of what has been agreed. After defeating a Tory coup she continued to try and seek assurances to no avail. It now looks as if her strategy is to force MPs to vote in favour of her plans.
But what if her plan doesn’t work? Playing hardball with EU leaders certainly doesn’t appear to have worked and it is hard to think of how we could have negotiated a worse deal with our European counterparts. It wasn’t so long ago that May was telling us over and over that no deal was better than a bad deal. Well her deal is a bad deal, but she is banking on everyone preferring that to a no deal. The next two or three weeks could be massive for the future direction of the UK.
There was controversy over claims that Jeremy Corbyn called Theresa May a ‘stupid woman’. The Labour leader insists he said ‘stupid people’ and there is of course no way of being 100% certain either way. You can make your own mind up with this video. Still, perhaps the Commons should be more focused on planning for a no-deal Brexit. With MPs set to have a two-week Christmas holiday, it is unlikely that anything will be resolved before the year is out.
We would like to draw your attention to an article that featured in the Financial Times yesterday morning. Unfortunately, it is behind a paywall so unless you are a subscriber you will be unable to read it. However, we thought it worthwhile to summarise the key points. First, the article header was ‘Brexit turns predicting the pound into a nightmare’, with the suggestion being that making a single forecast for sterling movements is impossible. Analysts are suggesting that depending on how UK politicians manage the EU divorce process from here, sterling could soar to $1.59 or plunge to $1.10.
This 49-cent difference between the forecasted highs and lows makes planning for these potential eventualities is extremely difficult, if not impossible. We do not want to be the ones to say we told you so, but if you do not plan ahead, you could find yourself losing thousands of pounds. A £250,000 property, for instance, has already changed value by £10,000 in the last twelve months. Don’t leave it to chance – speak to your Personal Trader on 020 7898 0541 about how a forward contract can lock you in today’s exchange rate, so it’s fixed no matter what the markets do.