Too much drama with the Brits these days, right? When will it end? How should you be trading British Pound Crosses? What the heck is up with the continued Japanese Yen strength?
Don’t worry, I have an answer for all of the above. Let’s check in with our famous five points of Invest Diva Diamond.
1- UK Economy Overview
A number of keywords come to mind when talking about the UK economy: Brexit, inflation, employment and growth. First let’s look at the positive and neutral stuff:
UK Unemployment rate steady at 11- year low: Unemployment in the UK remains at lows not seen since 2005. However, as always the speculators saw the glass half empty when the February 17th numbers came out and said “well, I was expecting the unemployment to fall even further. So you know what? Screw the British Pound. Let’s Dump it.” Mind you, the UK has one of the lowest unemployment rates in the European Union. Only Germany and the Czech Republic have a lower rate of joblessness, at 4.5 per cent.
UK’s retail sales up by most in more than 2 years: British shoppers snapped up bargains in the January sales which drove the total sales volumes up 2.3% compared with December.
UK Consumer Confidence also pretty high: Despite global worries, Britain’s Consumer Confidence Index increased two points to +4 in January.
UK GDP growth rises 0.5%: Britain’s economy picked up pace at the end of 2015. On the downside, GDP growth for the year as a whole was down making this one a bit of a mixed signal.
So, with all these positive stuff, an Invest Diva might ask “then why the heck is Mr. Pound in deep S#!*?” Here are some factors:
Global Turmoil: While the Brits are high and mighty, their neighboring countries or even the ones far far away are struggling. These struggles have cast a massive cloud on the UK growth outlook.
No more rate hike talks? Mark Carney, the Governor of the Bank of England (BOE), said this month that an“unforgiving” global environment was likely to keep rates at a record low of 0.5% for longer. However, policymakers signaled that the economy could overheat if they waited much more than a year to tighten policy. So there still is a chance…But probably not within 2016
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