Blue and gold background, brand colours for Cosmos Currency Exchange together with image of Tony Redondo the found of Cosmos. He is promoting his latest Gravitational Pull blog called A Soft Landing

A Soft Landing

A soft landing 

An economic ‘soft landing’ refers to when an economy slows down from a period of strong growth but avoids falling into a recession.

The achievement of an economic ‘soft landing’ has been the ‘holy grail’ sought by the world’s major central banks since they started sharply raising interest rates in 2022 in response to the rapid rise in inflation arising from the energy shock following Russia’s invasion of the Ukraine in February 2022.

A ‘soft landing’ remains likely in varying degrees across the globe with the US in pole position to achieve it. With its combination of a sustained fall in the inflation rate alongside continued signs of resilience in the employment market and strong economic growth.

Currency Exchange Rates Update

The Pound enjoyed a solid start to 2024 and finished January nearly 5% up on the year. Against both the Euro and the US Dollar and a whopping 12% up against the Australian Dollar over the same period.

What’s in the news?

Interest rates will be cut, but not just yet!

In the last two weeks we have had the latest interest rate policy decisions from all the world’s major central banks.

The uniform message is that the next direction on interest rates is lower. But the first-quarter timing that markets had priced in at the end of 2023 proved to be too ambitious. These are being priced out of the market and replaced with a slower timeframe.

The timing variances between the various central banks could spur some volatility, especially heading into spring. Expectations for which central bank makes the first move on cutting interest rates will shift as more data become available until the second half of the year. By then, it is likely that all the major central banks will have at least started cutting interest rates.

The inflation outlook is paramount.

The BoE, Fed and the ECB all expressed the need for greater confidence that the rate of inflation continues to head down towards the target rate. It is in all the respective economies but the speed at which it reaches the target could vary if some sort of inflation shock like the Red Sea conflict escalates further.

The Red Sea conflict has already upended key trade routes and raised shipping costs. A much bigger risk to the European economy than for the US.

Global Growth

The IMF (International Monetary Fund) raised its forecast for global growth in 2024 on the expansion in the US economy and the fiscal stimulus measured announced by the Chinese authorities. The IMF now expect the world economy to grow by 3.1% this year. Up from the previous 2.9% forecast of October 2023.

2024: The Super Election Year


2024 is seeing national elections in more than 60 countries worldwide. Involving around 2 billion voters, approximately a quarter of the world’s population.

2024 the super election year world map

In The UK…

The BoE to no one’s surprise voted to keep UK interest rates unchanged at 5.25% for the fourth month in a row. But this time with a three-way vote split. With six members voting in favour of keeping interest rates unchanged, two members voting to increase the Bank Rate by 0.25% to 5.5%- and one-member voting to reduce the Bank Rate by 0.25% to 5%.

This after the headline rate of inflation in the UK unexpectedly nudged upwards to an annual rate of 4% in December. The closely watched core consumer price index figure of 5.1% remains unchanged.

Good news

UK business optimism hit a four-month high according to the closely watched S&P survey on the expectation of new product launches and an economic rebound.

Chris Hayward, policy chairman at the City of London Corporation in a report said that recent reforms are honing the Square Mile’s competitive edge, and that London is the leading global financial centre.

Following Brexit, many predicted the UK’s financial services sector would lose much of its power as the “engine room” of the UK economy. It forecast “hundreds of thousands of jobs” would leave London, foreign direct investment would dry up, and the economy would be bruised beyond repair. Four years after leaving the EU, we have yet to see this momentous decline in the financial and professional services sector, or the predicted plundering of the City.

London is a global leader in bond markets, both issuance and trading, foreign exchange, and cross-border banking.

Foreign direct investment (FDI) in financial and professional services increased by 68% between 2021 to 2022 to more than £2bn as asset managers, fintech’s and investment banks opened offices in London.

The Nationwide reported that house prices posted their strongest improvement in a year. A sign that increasing mortgage affordability and hopes about interest rate cuts are buoying the market.

Figures published by the Bank of England showed mortgage approvals hit a six-month high. And Zoopla’s latest HPI housing inflation edged down 0.8% in January in fresh boosts for house buyers.

The latest Society of Motor Manufacturers and Traders (SMMT) figures showed that British factories built more than ONE MILLION vehicles last year. This is the first time since before the pandemic. A total of 1,025,474 cars and commercial vehicles were built, an increase of 17% on the previous year. A number of new models entered production in 2023 and around £23.7 billion of private and public investment commitments were made. That’s more than in the six previous years combined.

UK consumer confidence hits highest level in two years according to the latest GfK consumer confidence index.

GS (Goldman Sachs) is forecasting that the UK stock market will outperform both the US and EU benchmarks this year. GS expect UK equities to deliver 9% returns over 2024. Beating projected returns from the US S&P 500, leading eurozone markets and Japanese stocks.

Over the next five years the Wall Street bank expects average annual returns of 6% from UK stocks. This is among the highest returns of all asset classes looked at. It would represent a significant turnaround for Britain’s stock market, which has traded at a steep discount to rivals in recent years.

Kemi Badenoch’s Trade & Industry department last week published  Brexit – 4th Anniversary (

Not so good news

The ONS (Office for National Statistics) estimate net migration will increase the UK population by nearly 10% or 6.1 million by mid-2036. With net migration pushing the UK population over 70 million 11 years earlier than expected.

The ONS reported that UK retail sales plummeted by 3.2% in December. Well below analyst expectations and the largest monthly fall since January 2021 when Covid-19 restrictions pushed down sales.

The UK manufacturing sector contracted again in January according to the latest S&P’s global UK manufacturing Purchasing Managers’ Index (PMI). Citing increasing supply chain difficulties as the ongoing Red Sea crisis which has triggered the re-routing of deliveries away from the Suez Canal. Four of the PMI’s five sub-components showed trends signalling overall contraction. With the index suggesting a deterioration in operating conditions for 18 straight months. Total new orders kept falling last month. This was due to weaker demand both home and abroad. New business was also hit by weak customer confidence, order cancellations and client destocking.

Consumer borrowing dropped sharply last month according to figures released by the BoE. With consumer borrowing falling to £1.2bn in December, down from £2.1bn in November. The sharp fall largely reflected a steep drop in borrowing on credit cards, which fell from £1.0bn to £300m.

The ONS also reported that throughout 2023, there were over 25,000 company insolvencies. With every category of insolvency rising compared to the year before. UK firms are struggling with higher interest rates and weak consumer spending. The number of company insolvencies thus soared to its highest level since 1993 and voluntary liquidations reached the most since records began in 1960.

HSBC has been fined £57.4m for “serious failings” over customer deposit protection. The BoE’s PRA (Prudential Regulation Authority) said HSBC failed “over many years” to properly put in place the requirements to protect customer deposits dating back to 2015. It is the second highest penalty ever imposed by the regulator.

The PRA said that among its failings, HSBC incorrectly marked 99% of eligible beneficiary deposits as being “ineligible” for protection under the FSCS (Financial Services Compensation Scheme).

The Royal Navy has abandoned major warship patrols of the Falkland Islands because of ship shortages. Despite an official policy to patrol the South Atlantic, a major British warship has not visited the area for almost seven years. This leaves the islands’ defence to a small patrol vessel and four RAF Typhoons.

In The USA…

The Fed held rates steady for a fourth straight meeting. This signalled its openness to cutting rates but not necessarily straight away.           

Fed Chair Powell reinforced the idea that a rate cut in March is unlikely despite ongoing market speculation.

The US economy added 353,000 jobs in January. A much better figure than the expected 185,000 demonstrating again that the US labor market remains solid and is poised to support broader economic growth. The unemployment rate held at 3.7%, against an estimate for 3.8%.

US job openings rose in December to the highest level in three months. With fewer Americans quitting their jobs. However, lots of Americans are losing their jobs, especially in the tech sector. PayPal being the latest to slash its workforce, announcing a 9% cut that affects some 2,500 people.

The US economy grew by 3.3% in the fourth quarter of 2023, much better than the 2% gain expected by Wall Street. 

Militarily, the US hit back at Iran with air strikes dropping more than 125 bombs on Iran’s military and its allies in Iraq and Syria last Friday night as it began retaliation for attacks on American troops in Jordan that cost the life of three US servicemen.

In The EU

The ECB also held interest rates unchanged and reiterated it would keep eurozone interest rates high for a “sufficiently long duration” to bring inflation to target.

ECB officials have spent time recently pushing back against market expectations for interest rate cuts in the spring. Stressing the need to wait for first-quarter wage data.

Flash figures published by the European Union’s statistics agency showed the eurozone economy stabilized in the fourth quarter of 2023. Despite this, the euro had its worst January performance against the US dollar since 2015, falling by over 2%.

Eurostat is also predicting the EU population will peak at 453.3 million in two years’ time. Slumping to 419.5 million by 2100, despite massive immigration. The population is also set to age drastically. This is driven by a collapse in the birth rate with the consequent pressure building on the welfare state with taxes set to rocket on the young to pay for healthcare and pensions for the old.

The gulf in living standards between the US and the EU keeps on widening. In the final quarter of 2023, US GDP grew by an annualised 3.3%. In the same period. the Eurozone economy had zero growth and the German economy shrank.

According to the Ifo Institute, Germany’s economy will grow less than expected this year. With the eurozone economy teetering on the brink of recession. The respected IFO are now forecasting that Germany, the eurozone’s largest economy will expand by only 0.7% in 2024. That’s down from the 0.9% growth rate in GDP it predicted only in December. This after Germany’s highest court blocked Chancellor Olaf Scholz’s plan to spend €60bn of emergency borrowing on green initiatives. The climate spending package was found to be in breach of the country’s debt laws in November, forcing the chancellor to overhaul his budget.

Germany’s economy shrank by 0.3% last year after it was hit by higher interest rates and elevated energy costs.

The EU has agreed a €50bn financial support package for Ukraine within the bloc’s shared budget.


Nathan Sheets, global chief economist at Citi and a former US Treasury official in the Obama administration, said it was no longer “inevitable” that the size of the Chinese economy would surpass the US after Beijing lost major ground over the past two years. Suggesting that a weakened China won’t overtake the US economy ‘until 2080’. Citing rising debt, ageing population and ongoing property crisis as major factors holding back the Chinese economy.

Mr Sheets also pointed out that China had in fact shrunk in comparison to the US. China’s economy is now equivalent to 65% of America’s GDP, down from 75% in 2021.

Analysts have predicted for years that China would surpass the US as the world’s biggest economy thanks to its rapid growth rates and slowing expansion in the West.

GS (Goldman Sachs) began speculating in 2003 that China could overtake the US by 2041. At the time, China’s economy was just 15% of the size of the US. However, its economy grew rapidly after joining the WTO (World Trade Organisation) at the start of the millennium.

The CEBR (Centre for Economics and Business Research) recently warned that China’s demographic decline and the scars of its zero-Covid policy meant it may never overtake the US.

The CEBR now expects India to become the world’s largest economy by 2080.

China Evergrande Group’s liquidation order by a Hong Kong court cements the downfall of a company that exemplified the country’s real estate boom and bust. For global investors, what happens to the remnants will have implications far beyond one property developer. Once China’s biggest developer, Evergrande has reported more than $300bn in liabilities and its troubles have become a symbol of a years-long property crisis that has dealt a massive blow to the country’s economy.

The demise of Evergrande, which first defaulted on a debt payment in 2021 and declared bankruptcy in the United States this year, has been closely watched as it was once a pillar of China’s economy.

Boris Nadezhdin has emerged as a challenger to Vladimir Putin’s long reign in office. Nadezhdin is a fierce critic of the war in the Ukraine and has pledged to restore civil liberties in Russia, as well as relations with the West. Over Putin’s 24 years in power, the systemic opposition has been wiped out in Russia with opponents either jailed or in self-imposed exile, or dead.

Akio Toyoda, chairman of the world’s biggest carmaker by sales, Toyota has said that electric cars will never dominate market. Toyoda said electric vehicles would command 30% of global market share at best and consumers should not be forced to buy them. Speaking to employees in a question-and-answer session, Mr Toyoda said he believed battery EVs will only secure a maximum of 30% of the market, less than double their current share in the UK with the remaining 70% taken by fuel cell EVs, hybrids and hydrogen cars.

Mr Toyoda said “Customers, not regulations or politics should make that decision.”

Mr Toyoda, whose grandfather founded the car company, also pushed back against accusations that Toyota had fallen behind rivals in the development of EVs.

In recent weeks, his strategy has been vindicated after Toyota revealed it had produced a record 9.2m vehicles in 2023. Still with one month of the year to go. The annual total is expected to exceed 10m! At the same time, sales for January to November increased 7% to 10.2m vehicles.

The SMMT (Society of Motor Manufacturers and Traders) said the UK market share of electric cars went into reverse last year as consumers baulked at high prices and a lack of charge points. EVs’ share of the overall new car market shrunk from 16.6% in 2022 to 16.5%c in 2023 compares with the 17.2% share originally forecast by the SMMT.

Facebook is 20 years old and has 3 billion Users worldwide.  The company blew past analyst expectations in the fourth quarter, reporting a new revenue record of $40.1 billion, 96% of which came from advertising. That’s up 25% from last year’s December quarter while the company’s profit more than tripled year-over-year to $14 billion. In a call with investors, Meta CEO Mark Zuckerberg said “2023 was our ‘year of efficiency’,”. I think that being a leaner company is helping us execute better and faster” referring to the aggressive cost-cutting measures implemented in 2023, which included laying off thousands of employees.


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.

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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.


This week’s quote is from the philosopher Arthur Schopenhauer

“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident”.

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