Good morning,

GBP: Nothing doing 

Sterling initially rallied yesterday following retail sales data that showed the impact of the Black Friday sales events on the British high street. Sales rose by 1.1% on the month. Thanks to Black Friday, November will always be a monster month for retail; had it not have been then there would be real concerns about the sector as a whole. The crucial matter is how much demand cliff-edges in the coming months and, of course, how much of this spending was put on the plastic and therefore needs to be paid off in coming months.

Credit card debt did not get more expensive yesterday as the Bank of England held interest rates following their hike in November. The vote was unanimous which was not a surprise and the attached statement and minutes added nothing new either.

A focus on the fundamentals of the UK economy will re-emerge in 2018 but for the rest of this year, any movement in sterling is likely to come from political news via Westminster or Brussels with both votes and talks forthcoming.

EUR: Better but not by much

Have you ever upgraded your phone and discovered that the new one you have just isn’t as good as you thought it would be? Yesterday the European Central Bank held policy as is but upgraded both growth and inflation forecasts. The crucial thing being that while both growth and inflation are set to be seen as higher than originally expected, they are still not seen close enough to the Bank’s targets to inspire confidence in an upgrade to monetary policy. In short, despite all the support that negative interest rates and QE are giving to the Eurozone economy, the Bank is not happy with how much growth or inflation is being created.

The euro initially spiked on the upgrades but alongside a rather tired tone from European Central Bank President Draghi, it settled down quickly.

We are confident in the euro next year on the belief that the economic expansion in the Eurozone still has longer to go than it does in the US or here in the UK, and that will feed into a stronger single currency.

Elsewhere all is calm

There was a definitive feeling yesterday that markets are starting to run down the clock into the festive period and, as a result, volatility should start to slide away from prices. There are still things to be watched of course, mainly the ongoing Brexit negotiations, the passage of the tax plan in the States and the run in to the Catalonian elections in Spain. All have more than enough influence to make it a hairy, not merry, Christmas.

Have a great day and a better weekend.