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January

Sterling stabilises in spite of UK Prime Minister’s Brexit dilemma

Published: Tuesday 08 January 2019

  • More poor German factory data
  • Australian Trade Balance contracts
By David Johnson

Those in the financial markets are becoming increasingly certain that the US Federal Reserve doesn’t have the wiggle room to raise interest rates any further right now. This was reinforced by both the Federal Reserve Chairman and the Chairwoman of the Atlanta Fed in speeches yesterday. Hence, the US Dollar has been weaker in the last few trading days. US data has been mixed, global growth appears to be slowing and a growing number of ‘experts’ are telling us another recession is imminent. The other reason the US Dollar is weaker is the ongoing battle over whether the US President can get the funding to build the mythical Mexico border wall. Developments are awaited on that.
 
Brace yourself for Brexit talk…
And brace yourselves, but I am going to talk about Brexit now. Skip to the next paragraph if you don’t want to hear it. Anna Soubry appeared to be shocked when the remainer Member of Parliament (MP) took part in a TV interview right in front of a group of mouthy, rowdy Brexit supporters and they heckled her. I don’t condone their abusive language or their actions but Quelle Surprise! That was an aside to the pressure on the Prime Minister, which never seems to abate. The vote, which we think will happen next week, on the Brexit deal – as it stands – looks set to be a defeat for the PM. She is being told by some MPs that she should pledge to not allow a ‘no deal’ exit, but these are some of the same people who will defeat her proposal in next week’s vote. There appears to be no irony in that.
 
Either way, Sterling has stalled below USD 1.28 and just around EUR 1.1150. It was boosted this morning by a fairly strong Halifax House Price Index. At 1.3%, the annual house price inflation was more than three times the market forecast and a full 1% higher than in November. Other than Brexit, there is not a lot of scheduled news events for the UK economy, so Sterling will take its cues from other markets.
 
A bumpy night for the Australian Dollar
Overnight, we heard that Australia’s trade surplus reduced substantially to just AUD 1.93 billion. That is well below the forecasts of 2.23 billion that the markets had in mind. The Australian Dollar had a bumpy night but there is little overall change.
 
Euro weakens on European economic woes
And the early-doors news from Germany was just as bad as yesterday morning. Industrial production in the EU’s powerhouse, was down by 1.9% after a 0.8% decline last month. Anybody doubting the European economy is under pressure needs look no further. The Euro weakened in early trade.
 
More volatility expected…
This afternoon brings trade data from the US. Recent trade data has been very volatile around the globe, so we can take any forecasts on this with a pinch of salt. Hence, the US Dollar has the potential to be very volatile this afternoon. The current range sees the GBPUSD rate trending below $1.30 and above $1.26, so that circa four cents range is the one to watch. For specific levels and targets for your requirements, please speak with your Halo Financial Consultant.
 
Sock it to me!
And apropos of nothing, I have just been informed that socks have been in existence since the Eighth Century BC. I am not quite sure why they felt I needed to know that, but now I do. And now you do, too. The earliest socks are described as matted animal hair and they were called piloi. We are also speculating whether the original sellers were Marcus and Spartacus, but that is not clear. That completes your interesting fact of the day.
 
Guardian Angel
A woman is walking along the road, daydreaming, when a voice in her head says, “Stop right there!” She stops and realises she was just about to walk into the street and she would have been struck by the speeding lorry that whips past her. She wonders where the voice has come from, but her thoughts are interrupted.
“I am your guardian angel,” says the voice. “Only you can hear me, but I am here to make sure you don’t make mistakes.”
“That’s great,” says the woman, and I am grateful and everything, but where the hell were you on my wedding day?”

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news