It was all downhill for the dollar yesterday as the markets considered that the only way is down for US interest rates. This belief was supported by a bump in initial claims for unemployment benefits, with 236,000 new claimants.
In the UK we have just had the Gross Domestic Product (GDP) result, which showed a surprising 0.1% contraction in October and pretty much seals the deal on an interest rate cut from the Bank of England next week. We still have employment and earnings data on Tuesday, then inflation on Wednesday.
This has weakened sterling – or at least kept it on its already downward trajectory – and GBP/EUR is now down some 0.25% on yesterday.
The GDP drop is being blamed firmly on the chancellor for having the autumn Budget so late in the autumn (26 November) that it delayed business decisions and household spending.
However there has been some respite offered to the beleaguered UK property markets. The RICS House Price Balance – a survey of chartered surveyors – found that fewer of them were pessimistic about UK property prices going forward.
In both the business and political pages of newspapers right now the new topic of speculation is on whether the government might campaign to rejoin the EU Customs Union (though certainly not the EU itself). Although this would be a breach of their 2024 manifesto, the thinking appears to be that a majority of voters now realise that the “hard Brexit” was a mistake and has left the country poorer, and it would be the best hope for getting economic growth which still looks as far off as ever. Last month America’s National Bureau of Economic Research (NBER) suggested that GDP per head was down by 6 to 8% on where it would have been without Brexit.
There is still a long way to go on this, but it’s certainly one to watch.
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