Good morning,

GBO: Sterling unable to mount a recovery

Despite the likelihood of a leadership challenge seeming less likely by the minute, sterling has not been rewarded with a run higher. As someone said to me yesterday, I guess we shouldn’t be surprised that the people who conspired to write £350m on the side of the bus cannot count as high as 48. The atmosphere of rebellion will not have been helped by new polling suggesting that Theresa May’s popularity has risen in the past week. As we noted on Monday, the optics of men scheming against and laughing at an embattled female Prime Minister were unlikely to play well outside of the Westminster bubble.

For now, however, the chances of a leadership contest are no longer the most pressing political concern and so the focus will return to the parliamentary vote, whenever it is called. The Democratic Unionist Party once again declined to support the government’s agenda in votes on the finance bill and have increased the rhetoric from abstaining on the vote for the withdrawal agreement to vote against.

Sterling may be offered a slight push higher by government borrowing numbers at 09.30 which may have been strong of late and enabled Chancellor Hammond to be a little less frugal at the recent budget. The news is not a stable foundation for much of a drive forward; sterling needs positive news more than ever.

Next week I’ll host a webinar where I’ll run through a few scenarios of what we think will happen with sterling and the various Brexit deals that may appear in the coming four months. You can register for free here.

USD: House price concerns may be enough to stay Fed’s hand

If you were solely to look at the US dollar you would not think that markets are becoming increasingly worries about everything from oil prices, credit and housing and, as a result, global equities are feeling the pressure.

Against a backdrop of a weak housing market, the run of interest rate rises from the Federal Reserve has raised concerns about consumer confidence. While wages may be pushing higher, if the value on one’s house is falling alongside volatility in pension pots invested in the stock market, then consumers may start to pull in their horns.

We doubt that will happen this week – Black Friday and Cyber Monday will still be huge – but any reticence could easily be used by the Federal Reserve as an excuse for pausing their plans for additional interest rate increases.

US durable goods orders this afternoon will further outline the impact of the Trump Administration’s trade policy and whether we are still seeing manufacturers and producers cram in orders before tariffs increase in the future.

The USD will also not have been helped by President Donald Trump renewing his criticism of the Federal Reserve. “I’d like to see the Fed with a lower interest rate,” Trump told reporters in Washington. “We have much more of a Fed problem than we do with anyone else.”

Have a great day.