Sterling Strengthens

December 2, 2019

While the election campaigns continue to rage on, the Pound Sterling has steadily strengthened. Looking back over the last four months, to the low point where the pound reached 1.07 against the Euro, there has been a 9% rally. Furthermore, against the dollar, it has risen by 7%. While the UK currency remains at depressed levels, suppressed by the ongoing political turmoil, the international perception appears to be improving. Investors now believe that the end is in sight, and with the fair value of the pound likely higher than its current level, bargain hunters are keen to open positions. Nevertheless, the currency remains volatile, highly connected with the political commentary and is not for the faint hearted. For currency markets, the election is another binary event, with a Conservative majority expected to be positive and a minority government or labour victory negative.


US GDP Growth

Data out last week on the US economy continues to point to steady and robust growth. The second Q3 estimate for annualised GDP growth came in at 2.1%, ahead of the 2% previously reported and the 1.9% expected. Furthermore, a surge in durable goods orders and strong jobs figures indicates that business investment and confidence is improving. Better business investment will be key to sustaining growth over the coming years, as it has been the US consumer that has held up the economy during this period of weaker global growth. As ever, analysts will now be turning their attention to the crucial holiday spending period which many retailers will be relying on. Struggling bricks and mortar retailers will be nervously hoping that shoppers will be visiting physical stores rather than continuing to shift spending online. However, with Amazon hiring 200,000 additional workers for the season, clearly significant online spending is still expected.


China PMIs

November’s Purchasing Manager Indices (PMIs) for the Chinese economy were released over the weekend. These indicate that growth in both the manufacturing and non-manufacturing sectors of the economy accelerated in the month. The manufacturing PMI increased from 49.3 to 50.2, suggesting that the sector returned to growth and was above a consensus of 49.5. A reading above 50 indicates an expansion in activity. The Chinese economy is important for global growth and these figures will be a relief for those fearing a recession was approaching. An improving Chinese economy will also stimulate other South East Asian countries with close trading ties as well as Europe, particularly Germany, which has significant exports to the country.


Market Data

  % 1w* % 1m*
UK 0.38% 1.02%
US 0.21% 3.32%
Europe ex UK 0.27% 1.17%
Japan -1.04% 1.18%
Emerging Markets -1.60% -0.56%
Oil -3.77% 0.04%
Gold -0.63% -1.80%