Week in Currency - 18/11/2024

Euro crashes to yearly lows whilst the US Dollar remains the powerhouse among G10 currencies.

GBP

The UK economy barely grew in the third quarter and contracted in September, in a blow to the Labour government’s plans to deliver higher growth. GDP rose just 0.1 per cent as the country’s dominant services sector struggled during the three months to September, less than consensus expectations of 0.2 per cent and well below the second quarter’s 0.5 per cent.

Chancellor Rachel Reeves signalled her disappointment with the figures, which track economic output during Labour’s first three months in office and signal how far the UK is from reaching the government’s goal of “the highest sustained growth in the G7”.

?

USD

Jerome Powell, the chair of the Federal Reserve, said that a solid economy with low unemployment, robust consumer spending, and strengthening business investment gave the central bank room to take its time in cutting interest rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” Mr. Powell said during a speech in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

The Fed is trying to navigate a complicated moment. The economy remains healthy overall, but the job market has slowed over the past year - inflation has also been cooling steadily. Between the two developments, central bankers have decided that they no longer need to tap the brakes on the economy quite so hard.

?

EUR

The euro has sunk to yearly lows against GBP following the collapse of the German government. The country was plunged into crisis after Chancellor Olaf Scholz, of the Social Democrats, fired the finance minister and coalition partner, Christian Lindner of the Free Democrats, following weeks of internal tensions. Germany is set to hold elections on 23 February, following the collapse of the governing coalition. The February date is a proposal and there are several steps to confirmation. The German press agency DPA reported that these were largely a formality. It said the next step was for Scholz to put the current government to a confidence vote on 16 December

If he loses, which is the expected outcome, the election date will formally be proposed to President Frank-Walter Steinmeier. He will then have 21 days to dissolve the German parliament.

?

Elsewhere

China’s economy showed signs of stabilisation in October, buoyed by better-than-expected retail sales. Industrial output rose 5.3% from a year earlier, slightly slower than the previous month, while home-price declines abated.

The Australian Dollar gained ground following hawkish comments from Reserve Bank of Australia Governor Michele Bullock last Thursday. Bullock emphasized that current interest rates are sufficiently restrictive and will remain unchanged until the central bank is confident about the inflation.

Have a good week!

Estuary FX

This week’s key data:

?