Margaret Thatcher always used to say that “you can’t buck the markets”.
Having, in 1990, been dragged, very much against her will, into joining the exchange rate mechanism of the European monetary system (in which other EU currencies traded in a fixed band around the deutschmark in what was intended to be a precursor to the euro), she appeared to gain vindication 30 years ago today, when the UK government abandoned its attempt to keep the pound within the mechanism and let it float — which in practice meant that it let the currency collapse.
The events of “Black Wednesday” were a classic example of how economic actors can inadvertently display their weakness when they try to show strength.
The pound had been overvalued when it entered the mechanism. Then the mark strengthened still further after the US Federal Reserve started to cut rates to stimulate the economy. That briefly pushed the pound above $2, an infeasible level.
Hedge funds, led by George Soros, who would become a household name as a result, realised that such a high level for the pound could not be defended and prepared to place big negative bets against sterling.
Early on Black Wednesday, the Bank of England (not independent of the government at that point) announced that it was raising rates by two whole percentage points, from 10 per cent to 12 per cent.
With most British homeowners on variable-rate mortgages, this meant that their monthly borrowing costs had leapt by 20 per cent. Still, everyone kept selling the pound. By lunchtime, there was a new announcement; the lending rate was going up to 15 per cent.
This extraordinarily aggressive step was directly counterproductive. It meant that everyone’s mortgage payments would go up by 50 per cent, which traders (particularly Mr Soros) knew was untenable.
Everyone kept selling the pound, with only the Bank of England itself around as a buyer. After the market closed, the chancellor, Norman Lamont, announced on a street pavement that Britain was leaving the exchange rate mechanism.
Next morning, the Bank of England cut rates all the way down to 9 per cent, and the government embarked on a new strategy based on a weak currency.
It strengthened the economy nicely but not the political fortunes of the Conservative Party, by then led by John Major; its reputation for fiscal competence would take a generation to recover.
One of the many important lessons from the incident is that governments can’t peg a currency above a level that the market will accept.
It doesn’t have to be the government that takes the blame. In 1985, the pound tanked after the Fed raised the fed funds rate to 11.75 per cent late in the previous year. It led to a speculative pile-on that took the pound as close as it has ever been to parity.
And the biggest daily fall by far for the pound came on the night of the Brexit referendum in 2016. Black Wednesday saw the first ever fall of more than 4 per cent; the British electorate managed to make it fall by 8 per cent.
What lessons for today? Any intervention in foreign exchange markets must be credible to have any chance of working. And when the Fed takes a course that is out of sync with the rest of the world, stresses increase on the rest of the foreign exchange architecture.
That is unfortunate because US bond yields are in an upswing again. As of late Thursday trading, 10-year real yields (which offer inflation compensation) had topped 1 per cent.
This landmark was last reached for a few weeks in late 2018, and helped to precipitate a stock sell-off and a “pivot” towards easy money by the Fed. That seems very, very unlikely in the immediate future. Before 2018, real yields had been below 1 per cent uninterruptedly for seven years.
In the six months since the invasion of Ukraine, 10-year real yields have surged by more than two full percentage points. This is as big a financial shock as any since the global crisis year of 2008.
And the problem is that this brings more money into the dollar, and puts more pressure on everyone else.
If anyone wants to try making a big contrarian bet based on fundamentals, they have a problem because those fundamentals have never been so ambiguous.
These could be difficult times to intervene, then. If anyone should be tempted to try, it might be the Bank of Japan. The country continues to have far lower inflation than anyone else, and this should lead its currency to appreciate over time.
Thus, the extent of the devaluation it has suffered on a real effective broad rate is awe-inspiring.
The last big wave down came with the advent of “Abenomics”, after the late Shinzo Abe became prime minister for the second time 10 years ago and the government wanted a big boost to Japan’s competitiveness. It was welcome.
This most-recent fall, as the Bank of Japan stays obdurately dovish and points out that Japan’s inflation is still low, is not. That leads to speculation about intervention from the Ministry of Finance to strengthen the yen.
The problem with this is that almost all recent attempts at intervention have backfired. The ministry sold yen (to make the currency go down), and instead it went up.
The bruised British officials from 30 years ago would probably advise the Japanese to save their money and not attempt to buck the market.
When the Fed is out of sync with the rest of the world, and the global imbalances are as deep as they are now, it is best for everyone else to maintain what the British would call a stiff upper lip.
That leads to the question of exactly where the global economy is heading and whether the imbalances are here to stay. And, unfortunately, the latest data from Barclays shows that imbalances look set to intensify.
It hasn’t been the best few months for the global economy, thanks to at least three shocks: the energy crisis in Europe, the continuing pandemic lockdowns in China and the decision by central banks worldwide to tighten monetary policies to curb surging prices of goods and services.
That triple whammy sets the stage for a “synchronous global slowdown”. That is mainly because there is no sign of central banks letting up.
Barclays analysts Ajay Rajadhyaksha and Amrut Nashikkar don’t expect the Fed and European Central Bank to show any signs of hitting the brakes for the rest of the year.
The reason for such hawkishness is the multi-decade surge in inflation on both sides of the Atlantic, massively exacerbated by the energy shock caused by the invasion of Ukraine.
Before the war, Russia had provided roughly a quarter of Europe’s energy (gas and oil). A few months ago, many analysts assumed the use of natural gas exports as a bargaining tool would have ceased in time for normal supplies by winter, when Europe’s gas needs are greatest.
Instead, in mid-September, Russia is still amping up the pressure by cutting off supply, claiming technical reasons.
On the other side of the world, China, normally considered the largest contributor to global growth, had a very weak second quarter as Covid-19 lockdowns in major cities such as Shanghai continue.
Even as rules have relaxed recently, such restrictions have significantly hurt economic activity. The nation’s property sector continues to falter in the third quarter.
Cost of living crisis in the UK — in pictures
“All in all, the world economy seems headed for a very sharp slowdown,” they wrote in a note on Thursday. “We expect inflation worldwide to slow as activity weakens and base effects kick in.”
For now, inflation has driven spectacular corrections for bonds — although it is noticeable that the US is relatively unscathed.
Equity indexes aren’t faring any better, slumping anywhere from 15 per cent to 25 per cent across the developed world. Even emerging market stocks have joined the downturn, shedding over a quarter of their value this year.
Few asset allocation choices prove attractive amid this environment, pushing investors to look for “the least dirty shirt in the laundry”.
For the Barclays analysts, whether considering equities or debt, the cleanest shirts are in the US.
“The one standout for us is not an asset, but a geography. Specifically, the US is in better shape than other major economies.”
If it wasn’t evident already, the moral and political dilemmas that lie ahead for central banks promise to be as intractable as the economic challenges.
Asked after Black Wednesday if he had any regrets, chancellor Mr Lamont said “Je ne regrette rien”. He was relieved of his job soon after.
Mr Lamont’s assistant gaining his first experience in politics, the future prime minister David Cameron, subsequently said that his favourite song was Tangled Up In Blue by Bob Dylan, which seems appropriate given his entanglement in Britain’s serial ruptures with the EU.
Black Wednesday came as The Shamen’s Ebeneezer Goode replaced Snap’s Rhythm Is A Dancer as the number one. So, if all else fails, you could always go and dance all night in a field with thousands of others.
UAE currency: the story behind the money in your pockets
ABU DHABI ORDER OF PLAY
Starting at 10am:
Daria Kasatkina v Qiang Wang
Veronika Kudermetova v Annet Kontaveit (10)
Maria Sakkari (9) v Anastasia Potapova
Anastasia Pavlyuchenkova v Ons Jabeur (15)
Donna Vekic (16) v Bernarda Pera
Ekaterina Alexandrova v Zarina Diyas
PROVISIONAL FIXTURE LIST
Premier League
Wednesday, June 17 (Kick-offs uae times) Aston Villa v Sheffield United 9pm; Manchester City v Arsenal 11pm
Friday, June 19 Norwich v Southampton 9pm; Tottenham v Manchester United 11pm
Saturday, June 20 Watford v Leicester 3.30pm; Brighton v Arsenal 6pm; West Ham v Wolves 8.30pm; Bournemouth v Crystal Palace 10.45pm
Sunday, June 21 Newcastle v Sheffield United 2pm; Aston Villa v Chelsea 7.30pm; Everton v Liverpool 10pm
Monday, June 22 Manchester City v Burnley 11pm (Sky)
Tuesday, June 23 Southampton v Arsenal 9pm; Tottenham v West Ham 11.15pm
Wednesday, June 24 Manchester United v Sheffield United 9pm; Newcastle v Aston Villa 9pm; Norwich v Everton 9pm; Liverpool v Crystal Palace 11.15pm
Thursday, June 25 Burnley v Watford 9pm; Leicester v Brighton 9pm; Chelsea v Manchester City 11.15pm; Wolves v Bournemouth 11.15pm
Sunday June 28 Aston Villa vs Wolves 3pm; Watford vs Southampton 7.30pm
Monday June 29 Crystal Palace vs Burnley 11pm
Tuesday June 30 Brighton vs Manchester United 9pm; Sheffield United vs Tottenham 11.15pm
Wednesday July 1 Bournemouth vs Newcastle 9pm; Everton vs Leicester 9pm; West Ham vs Chelsea 11.15pm
Thursday July 2 Arsenal vs Norwich 9pm; Manchester City vs Liverpool 11.15pm
The years Ramadan fell in May
Sustainable Development Goals
1. End poverty in all its forms everywhere
2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture
3. Ensure healthy lives and promote well-being for all at all ages
4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
5. Achieve gender equality and empower all women and girls
6. Ensure availability and sustainable management of water and sanitation for all
7. Ensure access to affordable, reliable, sustainable and modern energy for all
8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
9. Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation
10. Reduce inequality within and among countries
11. Make cities and human settlements inclusive, safe, resilient and sustainable
12. Ensure sustainable consumption and production patterns
13. Take urgent action to combat climate change and its effects
14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development
15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
17. Strengthen the means of implementation and revitalise the global partnership for sustainable development
Scoreline
Arsenal 0 Manchester City 3
- Agüero 18'
- Kompany 58'
- Silva 65'
The%20specs
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Dhadak
Director: Shashank Khaitan
Starring: Janhvi Kapoor, Ishaan Khattar, Ashutosh Rana
Stars: 3
Five films to watch
Castle in the Sky (1986)
Grave of the Fireflies (1988)
Only Yesterday (1991)
Pom Poki (1994)
The Tale of Princess Kaguya (2013)
Killing of Qassem Suleimani
The specs
Engine: 6.2-litre supercharged V8
Power: 712hp at 6,100rpm
Torque: 881Nm at 4,800rpm
Transmission: 8-speed auto
Fuel consumption: 19.6 l/100km
Price: Dh380,000
On sale: now
Four tips to secure IoT networks
Mohammed Abukhater, vice president at FireEye in the Middle East, said:
- Keep device software up-to-date. Most come with basic operating system, so users should ensure that they always have the latest version
- Besides a strong password, use two-step authentication. There should be a second log-in step like adding a code sent to your mobile number
- Usually smart devices come with many unnecessary features. Users should lock those features that are not required or used frequently
- Always create a different guest network for visitors
Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
Company profile
Name: Steppi
Founders: Joe Franklin and Milos Savic
Launched: February 2020
Size: 10,000 users by the end of July and a goal of 200,000 users by the end of the year
Employees: Five
Based: Jumeirah Lakes Towers, Dubai
Financing stage: Two seed rounds – the first sourced from angel investors and the founders' personal savings
Second round raised Dh720,000 from silent investors in June this year
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20myZoi%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202021%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Syed%20Ali%2C%20Christian%20Buchholz%2C%20Shanawaz%20Rouf%2C%20Arsalan%20Siddiqui%2C%20Nabid%20Hassan%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%3C%2Fstrong%3E%2037%3Cbr%3E%3Cstrong%3EInvestment%3A%3C%2Fstrong%3E%20Initial%20undisclosed%20funding%20from%20SC%20Ventures%3B%20second%20round%20of%20funding%20totalling%20%2414%20million%20from%20a%20consortium%20of%20SBI%2C%20a%20Japanese%20VC%20firm%2C%20and%20SC%20Venture%3C%2Fp%3E%0A
In-demand jobs and monthly salaries
- Technology expert in robotics and automation: Dh20,000 to Dh40,000
- Energy engineer: Dh25,000 to Dh30,000
- Production engineer: Dh30,000 to Dh40,000
- Data-driven supply chain management professional: Dh30,000 to Dh50,000
- HR leader: Dh40,000 to Dh60,000
- Engineering leader: Dh30,000 to Dh55,000
- Project manager: Dh55,000 to Dh65,000
- Senior reservoir engineer: Dh40,000 to Dh55,000
- Senior drilling engineer: Dh38,000 to Dh46,000
- Senior process engineer: Dh28,000 to Dh38,000
- Senior maintenance engineer: Dh22,000 to Dh34,000
- Field engineer: Dh6,500 to Dh7,500
- Field supervisor: Dh9,000 to Dh12,000
- Field operator: Dh5,000 to Dh7,000
The specs: 2018 Mercedes-AMG C63 S Cabriolet
Price, base: Dh429,090
Engine 4.0-litre twin-turbo V8
Transmission Seven-speed automatic
Power 510hp @ 5,500rpm
Torque 700Nm @ 1,750rpm
Fuel economy, combined 9.2L / 100km
The%20specs
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Info
What: 11th edition of the Mubadala World Tennis Championship
When: December 27-29, 2018
Confirmed: men: Novak Djokovic, Rafael Nadal, Kevin Anderson, Dominic Thiem, Hyeon Chung, Karen Khachanov; women: Venus Williams
Tickets: www.ticketmaster.ae, Virgin megastores or call 800 86 823
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
More from Neighbourhood Watch:
Indoor Cricket World Cup Dubai 2017
Venue Insportz, Dubai; Admission Free
Fixtures - Open Men 2pm: India v New Zealand, Malaysia v UAE, Singapore v South Africa, Sri Lanka v England; 8pm: Australia v Singapore, India v Sri Lanka, England v Malaysia, New Zealand v South Africa
Fixtures - Open Women Noon: New Zealand v England, UAE v Australia; 6pm: England v South Africa, New Zealand v Australia
Profile of MoneyFellows
Founder: Ahmed Wadi
Launched: 2016
Employees: 76
Financing stage: Series A ($4 million)
Investors: Partech, Sawari Ventures, 500 Startups, Dubai Angel Investors, Phoenician Fund
Profile
Co-founders of the company: Vilhelm Hedberg and Ravi Bhusari
Launch year: In 2016 ekar launched and signed an agreement with Etihad Airways in Abu Dhabi. In January 2017 ekar launched in Dubai in a partnership with the RTA.
Number of employees: Over 50
Financing stage: Series B currently being finalised
Investors: Series A - Audacia Capital
Sector of operation: Transport
UAE currency: the story behind the money in your pockets
India squads
Test squad against Afghanistan: Rahane (c), Dhawan, Vijay, Rahul, Pujara, Karun, Saha, Ashwin, Jadeja, Kuldeep, Umesh, Shami, Pandya, Ishant, Thakur.
T20 squad against Ireland and England: Kohli (c), Dhawan, Rohit, Rahul, Raina, Pandey, Dhoni, Karthik, Chahal, Kuldeep, Sundar, Bhuvneshwar, Bumrah, Pandya, Kaul, Umesh.
ODI squad against England: Kohli (c), Dhawan, Rohit, Rahul, Shreyas, Rayudu, Dhoni, Karthik, Chahal, Kuldeep, Sundar, Bhuvneshwar, Bumrah, Pandya, Kaul, Umesh
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
NEW%20UTILITY%20POLICY%3A%20WHAT%20DOES%20IT%20REGULATE%3F
%3Cp%3E%E2%80%A2%20Agreements%20on%20energy%20and%20water%20supply%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Applied%20service%20fees%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Customer%20data%20and%20information%20privacy%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Prohibition%20of%20service%20disconnections%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Customer%20complaint%20process%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Management%20of%20debts%20and%20customers%20in%20default%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Services%20provided%20to%20people%20of%20determination%20and%20home%20care%20customers%3C%2Fp%3E%0A
Aldar Properties Abu Dhabi T10
*November 15 to November 24
*Venue: Zayed Cricket Stadium, Abu Dhabi
*Tickets: Start at Dh10, from ttensports.com
*TV: Ten Sports
*Streaming: Jio Live
*2017 winners: Kerala Kings
*2018 winners: Northern Warriors
Sui Dhaaga: Made in India
Director: Sharat Katariya
Starring: Varun Dhawan, Anushka Sharma, Raghubir Yadav
3.5/5
Final scores
18 under: Tyrrell Hatton (ENG)
- 14: Jason Scrivener (AUS)
-13: Rory McIlroy (NIR)
-12: Rafa Cabrera Bello (ESP)
-11: David Lipsky (USA), Marc Warren (SCO)
-10: Tommy Fleetwood (ENG), Chris Paisley (ENG), Matt Wallace (ENG), Fabrizio Zanotti (PAR)
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Match info
Manchester United 1
Fred (18')
Wolves 1
Moutinho (53')
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
Race card
5pm: Maiden (PA) Dh80,000 1,600m
5.30pm: Maiden (PA) Dh80,000 1,600m
6pm: Arabian Triple Crown Round-2 Group 3 (PA) Dh300,000 2,200m
6.30pm: Liwa Oaisi Group 2 (PA) Dh300,000 1,400m
7pm: Wathba Stallions Cup Handicap (PA) Dh70,000 1,600m
7.30pm: Handicap (TB) Dh100,000 1,600m
The National selections: 5pm: Flit Al Maury, 5.30pm: Sadah, 6pm: RB Seqondtonone, 6.30pm: RB Money To Burn, 7pm: SS Jalmood, 7.30pm: Dalaalaat
