The last week of September must rank up there in terms of sheer currency market chaos and volatility since I started working in the financial markets in 1985.
As the ever negative British main-stream media never tire of telling us…
The Pound opened last week at some historic lows against its main currency market competitors: –
- January 2020 against the Euro (EUR)
- All-time low against the US Dollar (USD)
- 1984 low against the Canadian Dollar (CAD)
- March 2017 low against the Aussie (AUD)
- April 2022 low against the South African Rand (ZAR)
What you may be forgiven for not knowing is that by the end of the same week, the Pound had recovered, as follows: –
- Nearly 3.5% against the EUR
- Over 7% against the USD & ZAR
- Over 8% against the CAD & AUD
One of the things I most like about the currency markets is the perspective it gives you.
Are there lots of problems and issues in today’s UK?
Absolutely, yet we are far from alone: –
- Even taking account the recent not-so-mini budget presented by Kwasi Kwarteng, the UK has the second lowest debt levels in the G7 (the top 7 economies around the globe), lower than Japan; Italy; USA; France and Canada and is only bettered by Germany.
- The UK inflation rate has dropped to 9.9% according to the latest data. It\’s a record-breaking 10% in the EU including 10.9% in Germany; 10.5% in Spain and 17.1% in the Netherlands.
- The UK unemployment rate is 3.8%, about the lowest since 1974. Its 6% in the EU including 5.5% in Germany; 7.4% in France and 7.8% in Italy.
- The UK economy has not been in recession as first indicated by the ONS (Office for National Statistics) in the second quarter of 2022. Instead of contracting by 0.1%, it grew by 0.2%.
- In the same quarter, the US economy shrank by 0.6%.
- US stocks record their longest run of quarterly declines since the 2008 crisis.
All in all, I can’t help feeling: –
- We don\’t have a cost-of-living crisis. Instead, we have both a cost of lockdown and a media crisis.
- That if the likes of Germany, France and the IMF (run by a former EU Commission Vice President) all attack the British government\’s economic plan, you can bet that the UK\’s recently announced strategy for growth and competitive advantage has rattled them.
As the highly experienced and senior economist Patrick Minford said this week “Exactly the same howls greeted Margaret Thatcher’s monetarist policies in the early 1980s. And well I remember the protestations then, as I was one of her economic advisers. Forty years on, we know Thatcher was right”.
This week sees a busy start to the new month for economic data including the latest interest rate announcements from both Australia and New Zealand and often the single most important piece of global economic data on a monthly basis, the USA employment data out on Friday.
Of course, currency market volatility can bring trouble but with careful monitoring can also bring opportunity.
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This week’s quote is from Charles Darwin
“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”