Pound set for worst week in 2 years

What a difference a week makes. This time last Friday following the crushing election victory for the Conservatives the pound was trading close to a 7-month high against the US dollar and near a 29-month peak vs the Euro. Fast forward 5 trading days and sterling is on track for its worst weekly performance in 2 years, with declines in excess of 2% seen against all its major peers. The news being attributed to this change of fortunes is the promise from PM Johnson to end the transition period at the end of next year, but in truth the reasons behind the selling are a bit more nuanced. There’s an element of a buy-the-rumour-sell-the-fact sort of move that seems to have played out while the widely accepted belief that the outcome would mean smooth sailing ahead now looks misplaced to say the least.      

Q3 UK growth revised higher

The final economic data releases of note from the UK for the year have come in a little better than expected with third quarter growth being revised higher by 10 basis points from its prior estimate to stand at 0.4%. Following a contraction in Q2 this is pleasing, but then again the improvement is largely down to the statistical properties of looking at quarter-on-quarter releases. Most signs point to further weakness in the final quarter of the year and as the BoE pointed out yesterday there’s no evidence on the data front to support a Boris bounce just yet.   

Bailey the new BoE Governor

The Bank of England have announced that Andrew Bailey will replace Mark Carney as its new governor from 15th March 2020. Bailey will become the 121st governor of the Old Lady, and is widely seen as a fairly safe choice given both his long tenure at the bank as well as his background which has focused on the regulatory aspects of the operation. The role itself will no doubt be challenging with the ongoing political uncertainty and Bailey will be keen to be seen as remaining as neutral as possible on the issue of Brexit after seeing at close hand the difficulties Carney faced amidst accusations of political bias.    

This will be the final Market Talk of the year with the next due January 2nd 2020. I'd like to take this opportunity to wish all readers a very Merry Christmas and a Happy New Year!