Macro Commentary

The Bank of England kept policy on hold yesterday as expected, though the vote was split, with two members voting for a rate cut.

The government’s plans to legislate against extending the EU transition period beyond December next year, has raised concerns we could still leave the EU in a disorderly fashion. This led to sterling having its biggest one-day fall in over a year, dropping back to pre-election levels.

On the economic front, UK inflation was slightly stronger than expected, holding at 1.5%, whilst the jobs market remains relatively robust, with earnings (ex-bonus) rising at 3.5%.

On the exchanges, sterling has seen some dramatic losses following last week’s post-election rally.

GBP/USD is trading at 1.3100, with strong buying interest now building at 1.3000, whilst 1.3250 should provide a short-term cap.

GBP/EUR is finding support ahead of 1.1700, but there remains strong selling interest at the psychological 1.2000 level.

This report will return on the 10th January 2020.

We wish you all a very merry Christmas!

GBP/USD – 1-year chart

Week ahead

Date Release Last Expected*
27/12/19 EU ECB Economic Bulletin

*Bloomberg survey

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1125 AUD/USD 0.6895
GBP/USD 1.3030 USD/AED 3.6730
GBP/EUR 1.1715 GBP/AED 4.7850
USD/CHF 0.9800 EUR/AED 4.0850
USD/JPY 109.35 XAU/USD 1477

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7388 +12.82%
S&P 3205 +27.86%
EUROSTOXX 3752 +25.03%
DFM GENERAL INDEX 2768 +9.41%

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.78888% 2 year 0.79%
6 month 0.85875% 3 year 0.82%
12 month 0.95513% 5 year 0.88%

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