Stress in the UK bond market sent the pound tumbling against its rivals last week. By Friday afternoon, GBP/EUR had fallen to its lowest level in more than two months, while GBP/USD lost a whopping three cents over the course of the week.
Amid the bond bust up, Chancellor Rachel Reeves was forced to defend the timing of a trip to China. Reeves is under pressure to come up with a solution to the volatility before it turns into a full-blown panic. Given Labour’s commitment to not raise taxes on workers, it is likely that Reeves will announce departmental spending cuts to rebuild the fiscal headroom.
Widespread demand for the US dollar helped it pile more pressure on European currencies. Figures from December’s non-farm payrolls report showed that the US economy added more than 250,000 jobs in the month, the highest since March.
The Canadian dollar recorded weekly gains over the US dollar, the euro and the pound last time out. Its cause was helped by falling unemployment
A busy week for UK data features GDP growth, inflation and retail sales. We’ll also see inflation data from the US as well as some crucial reads out of China.
Ahead of next month’s federal elections, Alternative für Deutschland (AfD) co-leader Alice Weidel has called for mass deportations of immigrants. The AfD are currently second in national polls, meaning a future coalition may have to draw on the party’s support to function.
The recent market volatility has set the stage rather nicely for our January-March Quarterly Forecast. You will be able to get your hands on the report from tomorrow. Look out for plenty of analysis on the new risks facing Europe, plus the latest currency forecasts from leading banks and how this might impact your budget.
