Rising inflation and correspondingly higher interest rates have been providing a boost to the British pound.
The currency rose 1.9 per cent against the US dollar last week, and is up by about 8.1 per cent against the greenback so far this year.
Traders have been pushing the British currency higher for months as the Bank of England raised interest rates for successive months in its battle against inflation.
As inflation started to peak in the US and the eurozone, in the UK it remained stubbornly high.
As such, more interest rate increases have been needed to bring this sticky inflation under control.
Interest rates are now predicted to reach 6 per cent by the end of the year and the markets are already pricing in another 0.5 per cent rise in early August.
“Sterling’s more recent strength is predicated on further interest rate rises, where the Bank of England finds itself in the unenviable position of needing to continue the fight against inflation without tipping an already stuttering economy into recession, " Richard Hunter, head of markets at Interactive Investor, told The National.
“By contrast, the US economy is currently showing signs of heading towards a soft landing, which has resulted in some dollar weakness to the benefit, inter alia, of the pound.”
Bulls and bears
But the big question being asked is: Will the pound continue to go from strength to strength?
The bulls that have been pushing the pound higher on the back of the fastest monetary tightening moves by the Bank of England in a generation may find their charge stumbling on Wednesday as the latest UK inflation numbers are released.
Rising interest rates are all very well when it comes to the strength of sterling, but at some point the market will become convinced that something is tipping over in the economy and that will open the door for the bears to start taking the pound down.
That point may come on Wednesday.
“Elevated levels of inflation, coupled with weaker growth, [are] not necessarily a positive for the currency, even if interest rates are going up,” said David Adams, head of G10 FX strategy at Morgan Stanley.
Currently, the pound is about $1.31 to the US dollar, but many traders predict the British currency will start to decline soon.
Monex USA expects the pound to slip back to $1.29 by the end of the year. JP Morgan Chase is predicting an even harsher slide – down 9 per cent to $1.19 by year-end.
Meanwhile, on the flip side of the coin, Nomura forecast a stronger euro, which will climb by about 3 per cent against the pound to £0.88 by the end of September.
Morgan Stanley is forecasting a 6 per cent rise in the euro by the middle of next year.
“We’re starting to see the hedge fund community thinking about the weaker pound because now it’s very stretched,” said Carlos Fernandez-Aller, head of global FX at Bank of America.
“But we all got the weak pound trade wrong earlier in the year, so we’ll see.”
The interest rate balance
The pound bulls, however, point out that even if Wednesday's inflation number is lower, the Bank of England will still be inclined to raise interest rates and keep it than higher for longer than previously predicted.
As such, the central bank will have tighter monetary policy than the US Federal Reserve and the European Central Bank for some time to come.
“The UK has the highest nominal rates in the G-10 but also the lowest real rates in the G-10,” said Michael Cahill, FX strategist at Goldman Sachs, who sees the pound up about 1.4 per cent at $1.33 by the middle of next year.
“We’ve got still very strong inflation and wages. It calls pretty clearly for tight policy and that should benefit the currency.”
If Wednesday's inflation figures show a larger-than-expected fall, it may lower the demand for higher wages and give the Bank of England pause for thought that at least some of their 13 increases in interest rates are now feeding through into the economy.
Still, even if Wednesday's figures show the stickiness coming out of inflation in the UK, the Bank of England is not thought to be anywhere near the end of its rate-tightening cycle.
However, many analysts contend that the Federal Reserve is close and that US economy is more than likely heading for a soft landing.
As such, it is not only the pound that has been doing well against the dollar.
Last week, the euro touched $1.1248, its highest level against the greenback since February 2022. The Japanese yen has also been hitting multi-month highs against the dollar recently.
Nonetheless, while traders have been riding the pound higher on a wave of increasing interest rates, when those rate increases become detrimental to economic growth, the wave comes crashing down.
On Monday, a quarterly survey by Deloitte showed that optimism among British chief financial officers has plunged.
“The burst of business optimism seen in the spring has faded under the weight of inflation and rising interest rates,” Deloitte's chief economist Ian Stewart said.
“Corporates have responded with an increasing focus on cost reduction and cash control.”
The survey said tight monetary policy was viewed by the chief financial officers as the most serious threat to their business, trumping the concerns around geopolitics and energy prices that have dominated for the past two years.
UAE v IRELAND
All matches start at 10am, and will be played in Abu Dhabi
1st ODI, Friday, January 8
2nd ODI, Sunday, January 10
3rd ODI, Tuesday, January 12
4th ODI, Thursday, January 14
The 24-man squad:
Goalkeepers: Thibaut Courtois (Chelsea), Simon Mignolet (Liverpool), Koen Casteels (VfL Wolfsburg).
Defenders: Toby Alderweireld (Tottenham), Thomas Meunier (Paris Saint-Germain), Thomas Vermaelen (Barcelona), Jan Vertonghen (Tottenham), Dedryck Boyata (Celtic), Vincent Kompany (Manchester City).
Midfielders: Marouane Fellaini (Manchester United), Axel Witsel (Tianjin Quanjian), Kevin De Bruyne (Manchester City), Eden Hazard (Chelsea), Nacer Chadli (West Bromwich Albion), Leander Dendoncker (Anderlecht), Thorgan Hazard (Borussia Moenchengladbach), Youri Tielemans (Monaco), Mousa Dembele (Tottenham Hotspur).
Forwards: Michy Batshuayi (Chelsea/Dortmund), Yannick Carrasco (Dalian Yifang), Adnan Januzaj (Real Sociedad), Romelu Lukaku (Manchester United), Dries Mertens (Napoli).
Standby player: Laurent Ciman (Los Angeles FC).
MATCH INFO
England 19 (Try: Tuilagi; Cons: Farrell; Pens: Ford (4)
New Zealand 7 (Try: Savea; Con: Mo'unga)
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
INDIA SQUAD
Virat Kohli (capt), Rohit Sharma, Shikhar Dhawan, KL Rahul, Vijay Shankar, MS Dhoni (wk), Kedar Jadhav, Dinesh Karthik, Yuzvendra Chahal, Kuldeep Yadav, Bhuvneshwar Kumar, Jasprit Bumrah, Hardik Pandya, Ravindra Jadeja, Mohammed Shami
UAE squad
Ali Kashief, Salem Rashid, Khalifa Al Hammadi, Khalfan Mubarak, Ali Mabkhout, Omar Abdelrahman, Mohammed Al Attas (Al Jazira), Mohmmed Al Shamsi, Hamdan Al Kamali, Mohammad Barghash, Khalil Al Hammadi (Al Wahda), Khalid Eisa, Mohammed Shakir, Ahmed Barman, Bandar Al Ahbabi (Al Ain), Adel Al Hosani, Al Hassan Saleh, Majid Suroor (Sharjah), Waleed Abbas, Ismail Al Hammadi, Ahmed Khalil (Shabab Al Ahli Dubai) Habib Fardan, Tariq Ahmed, Mohammed Al Akbari (Al Nasr), Ali Saleh, Ali Salmeen (Al Wasl), Hassan Al Mahrami (Baniyas)
The Pope's itinerary
Sunday, February 3, 2019 - Rome to Abu Dhabi
1pm: departure by plane from Rome / Fiumicino to Abu Dhabi
10pm: arrival at Abu Dhabi Presidential Airport
Monday, February 4
12pm: welcome ceremony at the main entrance of the Presidential Palace
12.20pm: visit Abu Dhabi Crown Prince at Presidential Palace
5pm: private meeting with Muslim Council of Elders at Sheikh Zayed Grand Mosque
6.10pm: Inter-religious in the Founder's Memorial
Tuesday, February 5 - Abu Dhabi to Rome
9.15am: private visit to undisclosed cathedral
10.30am: public mass at Zayed Sports City – with a homily by Pope Francis
12.40pm: farewell at Abu Dhabi Presidential Airport
1pm: departure by plane to Rome
5pm: arrival at the Rome / Ciampino International Airport
UAE currency: the story behind the money in your pockets
Mountain%20Boy
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ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
The biog
Alwyn Stephen says much of his success is a result of taking an educated chance on business decisions.
His advice to anyone starting out in business is to have no fear as life is about taking on challenges.
“If you have the ambition and dream of something, follow that dream, be positive, determined and set goals.
"Nothing and no-one can stop you from succeeding with the right work application, and a little bit of luck along the way.”
Mr Stephen sells his luxury fragrances at selected perfumeries around the UAE, including the House of Niche Boutique in Al Seef.
He relaxes by spending time with his family at home, and enjoying his wife’s India cooking.
MATCH INFO
Champions League quarter-final, first leg
Tottenham Hotspur v Manchester City, Tuesday, 11pm (UAE)
Matches can be watched on BeIN Sports
Killing of Qassem Suleimani
COMPANY%20PROFILE
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What it means to be a conservationist
Who is Enric Sala?
Enric Sala is an expert on marine conservation and is currently the National Geographic Society's Explorer-in-Residence. His love of the sea started with his childhood in Spain, inspired by the example of the legendary diver Jacques Cousteau. He has been a university professor of Oceanography in the US, as well as working at the Spanish National Council for Scientific Research and is a member of the World Economic Forum’s Global Future Council on Biodiversity and the Bio-Economy. He has dedicated his life to protecting life in the oceans. Enric describes himself as a flexitarian who only eats meat occasionally.
What is biodiversity?
According to the United Nations Environment Programme, all life on earth – including in its forests and oceans – forms a “rich tapestry of interconnecting and interdependent forces”. Biodiversity on earth today is the product of four billion years of evolution and consists of many millions of distinct biological species. The term ‘biodiversity’ is relatively new, popularised since the 1980s and coinciding with an understanding of the growing threats to the natural world including habitat loss, pollution and climate change. The loss of biodiversity itself is dangerous because it contributes to clean, consistent water flows, food security, protection from floods and storms and a stable climate. The natural world can be an ally in combating global climate change but to do so it must be protected. Nations are working to achieve this, including setting targets to be reached by 2020 for the protection of the natural state of 17 per cent of the land and 10 per cent of the oceans. However, these are well short of what is needed, according to experts, with half the land needed to be in a natural state to help avert disaster.
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KILLING OF QASSEM SULEIMANI
How to turn your property into a holiday home
- Ensure decoration and styling – and portal photography – quality is high to achieve maximum rates.
- Research equivalent Airbnb homes in your location to ensure competitiveness.
- Post on all relevant platforms to reach the widest audience; whether you let personally or via an agency know your potential guest profile – aiming for the wrong demographic may leave your property empty.
- Factor in costs when working out if holiday letting is beneficial. The annual DCTM fee runs from Dh370 for a one-bedroom flat to Dh1,200. Tourism tax is Dh10-15 per bedroom, per night.
- Check your management company has a physical office, a valid DTCM licence and is licencing your property and paying tourism taxes. For transparency, regularly view your booking calendar.
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Libya's Gold
UN Panel of Experts found regime secretly sold a fifth of the country's gold reserves.
The panel’s 2017 report followed a trail to West Africa where large sums of cash and gold were hidden by Abdullah Al Senussi, Qaddafi’s former intelligence chief, in 2011.
Cases filled with cash that was said to amount to $560m in 100 dollar notes, that was kept by a group of Libyans in Ouagadougou, Burkina Faso.
A second stash was said to have been held in Accra, Ghana, inside boxes at the local offices of an international human rights organisation based in France.
COMPANY%20PROFILE
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Jeff Buckley: From Hallelujah To The Last Goodbye
By Dave Lory with Jim Irvin
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Retail gloom
Online grocer Ocado revealed retail sales fell 5.7 per cen in its first quarter as customers switched back to pre-pandemic shopping patterns.
It was a tough comparison from a year earlier, when the UK was in lockdown, but on a two-year basis its retail division, a joint venture with Marks&Spencer, rose 31.7 per cent over the quarter.
The group added that a 15 per cent drop in customer basket size offset an 11.6. per cent rise in the number of customer transactions.
THE SPECS
Engine: 3.5-litre supercharged V6
Power: 416hp at 7,000rpm
Torque: 410Nm at 3,500rpm
Transmission: 6-speed manual
Fuel consumption: 10.2 l/100km
Price: Dh375,000
On sale: now
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UAE currency: the story behind the money in your pockets
