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January

Pound gains momentum, US Dollar weaker

Published: Wednesday 24 January 2018

  • Sterling up on fall in Government borrowing
  • USD weaker as investors strike out abroad
  • UK wages data could add further zip to GBP
By  David Johnson

  

Pound gains momentum, US Dollar weaker
 
News of a halving of UK government borrowing in December allowed the Pound to regain its upward momentum and it breached $1.40 against the USD and is still trying to breach €1.14 against the Euro. The movement against the USD has a lot to do with the recovery in the rest of the world outside the US. That is encouraging investors to move money from safe haven bunkers in the US to other jurisdictions. That, in turn, is weakening the USD; something the US authorities appear to be happy about, because it is good for exporters.
 
However, UK data is also improving and the CBI industrial trends survey, released yesterday, added confirmation. A balance of 21 firms in the survey saw improvements in their order books and production is being driven largely by domestic demand. That points to confidence in other parts of the UK economy. We expect today’s average wage price inflation data to show the gap between inflation and wage growth narrowing. That would further strengthen the Pound.
 
Euro climbs against US Dollar
 
The weakness in the USD is further evidenced by the rise in the Euro-US Dollar rate, which has reached a two year high. We will get a raft of purchasing managers indices from  the Eurozone today. So those will be watched with keen interest.
 
Be prepared for New Zealand Dollar volatility
 
Overnight tonight we will get the New Zealand inflation data. A small rise compared to last month’s 1.9% is expected but that is probably not enough to encourage interest rate hikes from the Reserve Bank of New Zealand (RBNZ). The Kiwi Dollar could well be volatile overnight though, so automated orders may be a useful tool for both buyers and sellers.
 
A red flag?
 
And Nicola Sturgeon has declared that the Union Jack (Union Flag if you’re all modern and Politically Correct) will not fly on public buildings in Scotland to mark the Queen’s Birthday; as has been the tradition for the last 70 years or so. Another Great Briton (as well as the Queen; not Sturgeon) Winston Churchill, once said that, “A fanatic is one who can’t change his mind and won’t change the subject.” I couldn’t agree more.
 
Command
During a training exercise, a Lieutenant who was driving down a muddy farm track came across another Landrover stuck up to its axels in thick mud. There was a red-faced Colonel at the wheel.
"Is your Landy stuck Sir?" asked the Lieutenant as he pulled alongside.
"No," said the Colonel, coming over and handing him the keys. "Yours is."
 

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