The Pound Has A Spring In Its Step

This week’s quote is from Lord Northcliffe “News is what somebody somewhere wants to suppress; all the rest is advertising.”

What Is In The News?

The UK economy continues to defy the ‘doom-mongers’.

The Bank of England (BoE) reported that 43,536 mortgages were approved in February, up from 39,647 in January. It’s also well above the consensus forecast by analysts of 40,500. Pointing to slowly rebuilding demand now mortgage rates are starting to stabilise. This is despite the average rate on new mortgages continuing to rise.

A?Lloyds Bank survey?showed UK business confidence at a 10-month high with trading prospects rising the most in nearly two years. Confidence is higher across all business sectors, especially in construction, manufacturing, and retail.

Meanwhile, the British Retail Consortium (BRC) reported a record-high food inflation rate in March. The ninth continuous month of double-digit rises despite global wholesale food costs falling for at least 10 consecutive months.

As such, the money markets currently see a 60% chance of a further BoE rate rise in May versus a 48% chance that the Federal Reserve will raise US interest rates in May. The money markets are also much more dovish on Fed rates versus BoE rate rises in the second half of 2023 which should benefit the Pound in the second half of the year.

Net Zero. The looming British ban on the sale of new petrol and diesel cars has been thrown into chaos. This was after Brussels watered down its own restrictions under pressure from the German auto industry. Experts and politicians warn that British rules due to take effect in 2030 are now untenable. This follows the?European climbdown, which will allow internal combustion engines as long as they burn carbon-neutral petrol alternatives.

The UK has joined the?CPTPP?(Comprehensive and Progressive Agreement for Trans-Pacific Partnership). The first new country to join since it was set up in 2018. CPTPP member countries have a combined population of 500 million and a GDP of ￡9 trillion (13% of world GDP) and 15% of all global trade.

The UK is joining existing members Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and Canada. China has also applied to join.

Vanguard, the world’s second-biggest fund manager with over ￡6 trillion of global funds under management, announced it will be opening a second office in the UK. This time in Manchester rather than an office in the EU.

Humza Yousaf was elected as the new leader of the SNP and has taken over as First Minister of Scotland. Within days came the arrest of Peter Murrell, husband of former SNP leader and First Minister of Scotland Nicola Sturgeon. As part of an investigation into the party’s finances. This includes ￡600,000 of party funds supposed to be spent on Scottish independence campaigning, but is alleged to have been improperly used elsewhere. Later, Johnston Carmichael resigned their position after auditing the SNPs finances for over a decade.?

Finland has joined NATO (North Atlantic Treaty Organization) after Turkey’s Parliament unanimously approved Finland’s membership application. Finland has an 830-mile border with Russia. This offers NATO access to strong military, as well as Finnish airspace, ports and sea lanes.

A New York grand jury has indicted former President Donald Trump in connection with a $130,000 hush money payment to porn star Stormy Daniels ahead of the 2016 election. Trump is the first former US President to be charged with a crime. The indictment comes as he remains the leading contender seeking the 2024 Republican presidential nomination. Republicans and Trump supporters will point to his treatment in comparison to former Democrat President Bill Clinton and his involvement in various sexual scandals with Paula Jones, Gennifer Flowers, Monica Lewinsky and others.

Data from the World Inequality Database showed up some interesting results across the European continent. 21% of the total wealth in the UK is owned by just 1% of the population. Compared to 29% in Germany; 27% in France; 24% in Spain. Less surprising, 48% of the wealth in Russia is owned by just 1% of its population.

Market Update

The Pound had its best month in the currency markets against the US Dollar since last November in March. Last week it touched its highest level against the greenback since June 2022. It went even better against the Australian Dollar touching its highest level against the Aussie since February 2022. The gains were more modest against the Euro. However, the Pound still hit a 3-week high against the single currency last week.

Francesco Pesole, FX strategist at ING, said “The pound is set to be the?best-performing currency?of the first quarter of 2023. Having gained 2.5% against the dollar. Along with the improvement in the economic outlook, sterling is definitely drawing benefits from the market’s conviction that the BoE will need to continue raising rates.”

Just before the Easter break global oil prices soared. After OPEC (The Organization of the Petroleum Exporting Countries) unexpectedly announced a cut to crude output. West Texas Intermediate (WTI) soared as much as 8% in early trading and stood above $79 per barrel. This was after OPECs pledge to slash production by more than 1 million barrels per day. The price of Brent crude shot up almost 5% to $84 a barrel.

OPECs decision threatens to unleash a fresh bout of inflation onto the world’s economy. This may force the hand of even the major central banks like the US Federal Reserve, the Bank of England and the European Central Bank.

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