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  • richard evans

Not the time to wind-down just yet

Good morning

We have been getting some mixed messages from Fed officials for the first time in a while, with Collins saying 75bps in Dec is not off the table but Bostic saying we may see just 75-100bps more in total. GBPUSD is at 1.1815, EURUSD 1.0255, both a little lower than where we ended the week. GBPEUR a little higher at 1.1520, actually quite a big level for me and will be interesting to see if we can break and hold above there.

Some talk in the papers that the UK is looking at a Swiss-style agreement with EU, although this has already been denied. I would not be at all surprised if such an idea had been considered, not that I claim to know much about the Swiss agreement, although I do remember the Swiss voted against some of the EU’s financial equivalence rules a few years back with upset the EU. I’d imagine we will eventually end up with something of a deal to make trade easier and hopefully have a less fractious relationship but how that will look I don’t know. What is of interest though is whether the Sunak/Hunt era will see a softer stance on the EU.

CPO27 summit ended with an agreement that wealthier countries will give money to poorer countries for harm caused by climate change. In my mind this completely misses the point. I’m not climate activist but I’m thinking this is not something that can be made right with financial compensation. Still, unless China, India and the likes play ball as well there is little chance of really bringing down emissions in any really meaningful way.

China seems to have a growing Covid problem with infection numbers on the rise. Mass testing and more lockdowns expected and I am sure there are plenty going on that we don’t really know about. The idea of them using a western vaccine could lead to some sort of relaxation of restrictions but there will be a lot of problem in the meantime. China and Hong Kong stocks generally lower.

We are not at the end of the year but the US have Thanksgiving this Thursday which in the ‘old days’ seemed to mark the start of a wind-down that would take us into Christmas. More recently though December has seen some decent volatility and with the Fed meeting in mid-December we know we are not able to down tools any time soon. This week is still really a short one, with US out Thursday and really much of Friday so perhaps we too will enjoy something of a long weekend. We do have quite a lot of US data crammed into Wednesday as a result.

Of course much of the focus of the week will be on the World Cup which started yesterday with Ecuador beating hosts Qatar 2-0. There had been rumours that Qatar had tried to bribe eight Ecuadorian players tlo throw the match but I very doubt there was any truth to that. It is certainly going to be a World Cup steeped in controversy. Fifa president gave quite an unusual speech on Saturday accusing the West of hypocrisy over Qatar human rights record. Some teams, England included, were going to use the captains armband to show support for LGBT issues but have been told they will be booked if they do so. Fifa have rushed through their own armband initiative supporting various social issues. I don’t like football being used for political purposes and if a point needed to be made it should have done so before the event rather than at the event. Whether the tournament should ever have been held in a country with such different views on things such as same-sex relationships is another matter but its done and I’m not sure protesting about it during matches will really help.

England kick off their campaign today against Iran. My kids school are showing are allowing kids to miss some lesson time watching the match, which I have no problem with at all. Looking forward to seeing how full the stadiums are and really just hoping for a convincing performance from England. Wales take on USA this evening in what could be an entertaining match.

- 09.05 BoEs Cunliffe speaks

- 13.30 US Chicago Fed national activity index

- 21.45 NZ trade balance

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