Yesterday, with the US markets closed for Thanksgiving, the euro and pound fought back. Against both the US dollar has lost a third of its post-election gains this week, as the money markets continued to row back on their initial enthusiasm for the return of Donald Trump.
However, overall, an exciting sort of month for exchange rates has ended with the dollar more than 2% stronger against both the GBP and EUR and indeed the dollar index as a whole.
The threat to the euro from France’s political troubles seems to be limited. Following President Macron’s disastrous election in early summer that left him a lame duck, the Barnier government’s make-or-break budget plan looks set to be rejected. Stocks are down and bond yields are up. On the plus side, for French property buyers a budget rejection looks set to head off potential stamp duty rises.
It’s a mixed picture for European inflation, with Germany’s falling but Spain’s rising – we’ll hear the result for the bloc shortly – but there is no mistaking the business gloom in Europe. European Central Bank president Christine Lagarde addressed the question of Trump tariffs yesterday, suggesting that negotiation and buying more US goods could head off trouble. She said: “How do you make America great again if global demand is falling?” Trump may be more wary, after the perception that he was outsmarted by EU commissioner Jean-Claude Juncker during his first term.
Today is Black Friday on the high street and for online retailers, who hope to recoup some of their extra National Insurance costs. However, data yesterday from the British Retail Consortium suggested that consumer confidence has declined. “While there was a very slight improvement in people’s expectations of their personal financial situation, this was offset by declining expectations of the wider economy,” said BRC CEO Helen Dickinson.
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