Blue and gold background, brand colours of Cosmos Currency Exchange with an image of Tony Redondo the founder of Cosmos and the words '2024 An Election Year' which is the title of his latest Gravitational Pull blog post.

2024, An Election Year

What a political year 2024 promises to be, a year with not only the UK Election but a year full of key elections throughout the globe.

In the UK, the next general election needs to be held before the 28th of January 2025.

The next US Presidential elections are due to be held on the 5th of November. Do the Americans know about Guy Fawkes?!

Europe faces its biggest ever ballot year in 2024.  Between the 6th and 9th of June, eligible voters in the EU’s 27 member countries will choose who represents them in the European Parliament. The bloc’s only democratically elected institution.

There are also general elections throughout EU member states including Finland, Portugal, Lithuania, Belgium, and Croatia.

Elsewhere, the world’s largest-ever single-day election with more than 200 million eligible voters is due to be held in Indonesia on the 14th of February. Whilst India holds elections between April and May.

Economically, attention will continue to focus on the central banks and their interest rate decisions. With diverging forecasts for what the likes of the Bank of England, US Federal Reserve, and the European Central Bank are likely to announce and when.

Currency Exchange Rates Update

The Pound Sterling starts the New Year on a much better footing than it did 12 months ago. Up 2.7% against the Euro; 6.8% against the US Dollar; 7.4% against the Australian Dollar; 5.2% against the Canadian Dollar and 16.2% against the South African Rand.

What’s In The News?

Prime Minister Rishi Sunak said his “working assumption” is that a general election will be held in the second half of 2024. After festive season speculation the country could go to the polls in May.

Cash is still king in the UK. With £62 million being taken out of ATMs on December 22nd. Up from £51 million on the last Friday before Christmas in 2022.

Jeremy Hunt announced the Spring Budget of 2024 will be held on the 6th of March.

In The UK…

Good news

Deutsche Bank reckons the UK economy will avoid a recession in 2024. After the UK economy outperformed all expectations in 2023.

Deutsche Bank’s Sanjay Raja, chief UK economist, foresees a robust UK performance in 2024. Having peaked at over 11% in October 2022, inflation has fallen to below 4% in November 2023. That’s the first time in two years. Lower energy prices could save households £10-15bn in 2024. Raja expects sustained positive real wage growth, forecasting a 1.75% growth rate, among the decade’s highest. Tax cuts from the Autumn Statement are projected to add £10bn to incomes, with more anticipated in the March Spring Budget.

The UK’s service sector posted its best performance in six months in December. As hopes of lower borrowing costs in 2024 helped demand to recover with the S&P global UK services Purchasing Managers’ Index (PMI) climbing to 53.4 in December. The latest reading is a significant improvement on November’s reading of 50.9. The 50 mark separates economic growth from contraction.

Bunq, the second largest neo-bank in the EU is planning its return to the UK. Confirming London’s continued importance as Europe’s financial hub. A neo-bank is a fintech company which offer banking services “entirely online”. Bunq had stopped offering new accounts to UK customers because of Brexit red tape at the end of 2020 but its founder has now said that in its determination to return to the UK, the company is like a “dog with a bone”.

Microsoft announced a £2.5 billion investment in the UK over three years. This is to “expand its next generation AI data centre infrastructure”. Microsoft will be expanding its existing office space in the UK as well as building a new data centre. The Treasury announced that the US corporation has committed to training over a million people for the AI economy. And supporting “the UK’s growing AI safety and research efforts through partnerships with the Government and leading universities”.

The UK labour market is “undergoing a structural change.” This is “forcing up wages” according to Marion Amiot, a senior European economist at rating agency S&P.

The French Senate has voted through an amendment to the country’s new Immigration Law giving British second homeowners the automatic right to a long-stay visa. The amendment is still to be debated in the National Assembly before it is passed in the bill.

The Halifax house price index showed house prices bounced back further last month. As lower mortgage rates drove a resurgence in the property market. With the average home increased in value by 1.1% in December month on month. It was the third monthly gain in a row after six consecutive months of falls prior to that.

Several major banks have started 2024 by offering mortgage rates below 4%.

According to the latest reading from the Bank of England (BoE) net mortgage approvals for house purchases rose from 47,900 in October to 50,100 in November. It is the second consecutive month that mortgage approvals have increased. Net approvals for remortgaging also grew from 24,000 in October to 27,000 in November.

Chancellor Jeremy Hunt signed what he called a “groundbreaking” deal with Switzerland on financial services. Banking trade body UK Finance said it was a “landmark agreement” which could pave the way for deals with other key global financial centres. UK firms will be the only ones in the world exempt from new rules that any non-Swiss firms must establish a base in the country before serving Swiss clients. And British financial advisers to high-net-worth individuals will no longer need to register with Swiss registration bodies to serve Swiss clients, sit exams or provide documentation.

It comes as business and trade secretary Kemi Badenoch continues to negotiate a Swiss free trade agreement, amid the UK’s aim to hit a trillion pounds of exports a year by 2030.

Not So Good News

Sir Howard Davies, the chair of NatWest, has said it is “not that difficult” to buy a house. Sir Howard Davies has an annual salary of £763,000. Average house prices are £310,000.

Housing affordability data, however, disagrees, as do campaigners and mortgage advisers who said the comments were “ludicrous” and “insulting”. According to the Office for National Statistics (ONS) latest housing affordability data in March 2023, full-time employees in England could expect to spend around 8.3 times their annual earnings buying a home.

The Society of Motor Manufacturers and Traders (SMMT) reported that the UK’s car market has shrunk permanently since the pandemic. As the rise of home working and net zero initiatives hammer sales. New car sales in the UK hit 1.9m in 2023, a jump of 17.9% compared with a year ago, But still 17.7% lower than before Covid hit. Mr Hawes said he did not expect new car sales to ever return to their pre-pandemic peak of 2.69 million per year. A record previously reached in 2016.

Rishi Sunak confronts another by-election as ex-energy minister Chris Skidmore announces his swift departure from Parliament. Skidmore resigns due to government intentions to issue new North Sea oil and gas licenses, despite data indicating that domestic UK gas is 73% less carbon-intensive than LNG imports.

Mark your calendar for the 6th October 2024 – the day when the Entry/Exit System (EES) launches in Europe for British travelers. This system requires fingerprints and facial scans taken once, securely shared across all entry/exit points. Processing time for a car with 5 passengers may increase from 90 seconds to an estimated 7 minutes. Following EES implementation, the European Travel Information and Authorisation System (ETIAS) visa system will be introduced.

In The USA

The minutes of the Fed’s December meeting indicated that “it would be appropriate for policy to remain at a restrictive stance for some time.” A more hawkish tone than employed by Fed Chair Jerome Powell when speaking to the press in December.

The US economy created 216,000 new jobs in December. A much better than the expected figure, further diminishing prospects for an imminent Federal Reserve interest-rate cut. The unemployment rate held at 3.7% as the workforce shrank. However, it’s taking longer for unemployed Americans to find work. And the number of full-time employees dropped by the most since April 2020. 

Meanwhile, the US national debt hit an all-time record high of $34 Trillion (that is $34,000,000,000,000). The debt equates to about $100,000 per person in the U.S.

In The EU…

Eurozone inflation rose to 2.9% in December. Reversing six months of consecutive falls. And raising questions over how soon the European Central Bank (ECB) will start cutting interest rates. In a further blow to hopes for an early ECB rate cut, German inflation rose to 3.8%, its fastest rate for three months in December.

Journalist Jeremy Warner, says that 25 years after its launch, the euro has not fulfilled its economic promises. The major efficiency gains anticipated by European industry from pricing policies and financial strategies have failed to materialise. The eurozone’s aggregated inflation rate disguises big variations on the ground. A year ago, for instance, the inflation rate ranged from 6.7% in Spain through 11.3% in Germany to 21.7% in Latvia. Even today, with the generalised price surge now receding, the differences are extreme, ranging from minus 0.7% in Belgium to 6.9% in Slovakia.

Eddie George, ex-governor of the Bank of England, criticises Europe’s “one size fits all” monetary policy, which continues to face challenges in gaining economic legitimacy.

Aggregate per capita income in the eurozone did grow relatively strongly in the early years of the single currency. But this was also true virtually everywhere. And again within the euro area, performance was far from uniform. For Italy, for instance, membership of the single currency has coincided with an unprecedented period of economic stagnation. The country is scarcely any richer in per capita terms than it was a quarter of a century ago.

The European Centre for International Political Economy found that in 2021, GDP per capita in 14 EU states was lower than in 1999. France and Germany, once as wealthy as the 36th and 31st US states in 2000, now have lower GDP per capita. With French GDP below Arkansas (48th) and German GDP at Oklahoma’s level (38th).

Image of graph showing the Impact of the euro on prosperity 1999-2017 per inhabitant

Others

Leading investment bank Goldman Sachs warns oil prices could double if Houthi Red Sea shipping attacks continue. Daan Struyven, head of the oil research division, highlights the significance of transit routes for oil prices. He notes that a prolonged disruption in the Red Sea could lead to a $3-4 increase in oil prices. In contrast, a one-month disruption in the Strait of Hormuz could result in a 20% rise. Potentially doubling if the disruption persists.

Since November, the rebels have attacked commercial shipping in the Red Sea more than 20 times using missiles, drones, fast boats, and helicopters.

In response, the US in December announced Operation ‘Prosperity Guardian’. This will step up patrols of the Red Sea and Gulf of Aden to protect commercial traffic with ships from the UK, Australia and Canada among the other countries also involved.

China has front-loaded its oil import quotas for 2024. With an allocation to private refiners and traders that nearly matches all of the allowances granted for the whole of last year.

London gold price benchmark hit a record high in late December. As investors hunt for safe haven to shield themselves from economic and political volatility.

Gold hit a price of $2,069 per troy ounce, passing a previous record of $2,067 set in August 2020 according to the London Bullion Market Association.

Chinese shadow banking giant Zhongzhi Enterprise Group filed for bankruptcy. That cements the rapid downfall of a firm that oversaw more than $140 billion at its peak before succumbing to the property crisis that has wreaked havoc on the world’s second-largest economy. The downfall marks one of China’s biggest-ever bankruptcies, putting more stress on already fragile consumer and investor sentiment. 

Hao Hong, Chief Ecibinust at GROW Investment Group foresees China’s property “inventory overhang” persisting for a decade due to a prolonged debt crisis. Triggered by Beijing’s 2020 deleveraging, the real estate sector, vital for about one-third of China’s economy, faces sluggish home sales and stagnant prices.

THE COSMOS OFFER

Of course, currency market volatility can bring trouble but with careful monitoring can also bring opportunity.

At Cosmos, we provide our clients with a relationship not a transaction-based service.

We are pro-active not reactive.

We offer local collection accounts in: the USA; Canada; the EU and the UK saving clients time and money on transfers.

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Please call +44 (0) 300 124 6409 or email us to discuss your individual currency requirements. Alternatively if you’d like to receive our fortnightly blogs via email please subscribe here.

Quote

This week’s quote is from former US President Franklin D Roosevelt

“A smooth sea never made a skilled sailor”.

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