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Sterling ended Thursday at a five-week high over its main rivals.
After a turbulent end to November, the pound really hit its straps in the second half of this week. Boosted by positive economic data, sterling begins Friday at its best level since the end of October against both the euro and the US dollar.
Housing costs still reflected some lingering uncertainty, however. Per the monthly report by Halifax, house prices in the United Kingdom were unchanged in November from the month prior, undershooting expectations of a 0.2% increase. That took the average purchase price just a few pounds shy of £300,000, with mortgage affordability at its best in three years.
Things weren’t quite as rosy in the building sector. In the run-up to the autumn Budget, new orders dropped to their lowest since the Covid-19 pandemic. Infrastructure and residential building work were the particular low points in S&P’s report.
The end of the year is typically a quiet period for financial markets. This year, a pair of high-profile policy meetings from the Bank of England and the Federal Reserve respectively promise a change of pace. Both are expected to announce a quarter point cut. In the Fed’s case, 82% of economists in a recent poll conducted by Reuters expect that outcome, a trend that is weighing on the dollar.
An added layer of intrigue in Washington is the race to succeed Jerome Powell as Fed chair. Kevin Hassett is the frontrunner if you listen to the media, but his candidacy is prompting some unease on Wall Street. The thinking is that Hassett, who called Powell a “stubborn old mule” over his interest rate caution, might be tempted to throw caution to the wind in a bid to jumpstart growth.
And it’s full steam ahead for India. The Reserve Bank of India cut interest rates to 5.25% this morning amid high growth and stable inflation. A fair few nations might be looking at this “Golidlocks period” with a smidge of envy, particularly after the economy grew by a whopping 8.2% in the three months to September.
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GBP: Quick turnaround
Such has been the speed of the turnaround for the pound, it’s hard to think that the autumn Budget was just over a week ago. Since then, sterling has strengthened by almost a cent against the euro and by well over two cents against the struggling US dollar.
GBP/USD: the past year
EUR: Limiting losses
The euro has lost some ground to the pound this week, but any falls remain pretty minor in the context of the year as a whole. The euro was five cent weaker back in May and has strengthened by more than 5% against the pound if you zoom out to January.
GBP/EUR: the past year
USD: Hassett rumours unhelpful
Rumblings around the future chair of the Federal Reserve didn’t help the US dollar on Thursday. Already struggling thanks to weak data, the prospect of a central bank closer to White House influence and with more incentive to carry out the president’s policy missives didn’t do much for the US dollar’s reputation.
EUR/USD: the past year
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