Sterling set to strengthen

A string of stronger than expected data.

The sterling seems set to strengthen. At least against the Euro. That is the message that macro-economic fundamentals are giving us right now: robust Retail Sales figures, higher than expected core inflation, and rapidly reviving housing markets, the latest in a string of stronger than expected data.

There now seems little prospect that the new Bank of England Governor, Mark Carney, will preside over any more quantitative easing or cuts in base rates after he takes the helm in July. Indeed the sterling interest rate futures markets have already started to anticipate rises in rates, with the first 0.5 per cent hike now expected as early as the end of next year.

Short-term interest rates can be an important determinant of exchange rates; especially when the differential between the two rates involved changes rapidly, and one finds it hard to envisage a rise in Euro rates any time soon. Indeed, we are lead to believe that debate continues to rage within the European Central Bank as to whether they should take their deposit rate into negative territory.

I personally do not expect that to happen, principally because of the "locomotive effect" from an American recovery which is gathering pace by the day. The UK also stands to benefit from this effect, but much more so given the absence of the idiosyncratic challenges which face the Eurozone, in the shape of extreme imbalances between regions, ongoing steroidal austerity and the ever present threat of violent social unrest this summer as tragic levels of unemployment drive voters onto the streets.

The UK’s flexible labour market also places us in a much better position to expand. The foreign exchange markets have a knack of moving very rapidly to discount these sorts of changes in prospect for both the economy and interest rates.

If this move in sterling went too far, however, the new Governor may start protesting. He may well see the tightening in monetary conditions that this would imply, as too much, too early for a still nascent recover. However, the foreign exchange markets can move a long way, and very quickly, before he settles into his seat next month.

Bank of England Governor, Mark Carney. Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

Getty
Show Hide image

The Nicholas Lezard guide to spending your book advance

It was quite wonderful, once again, to be able to do things such as go to restaurants, develop a fairly serious port habit and generally not scrounge.

Well, the good times had to end, as they always do, I suppose. I spent the last few months of 2016 experiencing the novel sensation of not being broke. You should try not being broke some time: it’s delightful. Then again, maybe you’re already not broke. We’ll come back to this later.

Anyway, the last time I had enough cash to be free of any kind of worry was back in, I think, 1989. I had an office job and was also getting regular work on the Sunday Correspondent. It wasn’t exactly two salaries but it was certainly at least one and a half.

One day, though, the good people at British Telecom – for that was where I was mostly employed – decided that I ought to be promoted. I didn’t like this idea, because it meant that I would have to start doing some actual work, rather than pottering around the place chatting to people and going for four-pint lunches. So I resigned. What could possibly go wrong? The Sunday Correspondent was a fine paper, and maybe one day I would be literary editor.

You may be wondering, if you are under 50, what the Sunday Correspondent is or was. Well, exactly. It was, as the keener among you will have worked out, a newspaper, a nice, liberal one, which appeared – the clue is in the name – on Sundays. And then one day it didn’t. So within a fairly short period of time I went from having two jobs to having none, and since then I have not troubled the bank by having more money than I know what to do with.

Oh, I get by. There are many, many others much, much worse off than I am. But it was quite wonderful, once again, to be able to do things such as go to restaurants, develop a fairly serious port habit and generally not scrounge.

My munificence to my children was lavish, for once. They’re not daft, though, and they knew it couldn’t and wouldn’t last, and when all those horrible bills that come at the beginning of the year came at the beginning of the year, the status quo ante reasserted itself, and I am going to have to rein things in once more. Rather fewer plates of eggs Benedict for breakfast at the posh eatery in Baker Street, and rather more bowls of Rice Krispies instead.

Or I could find a rich woman. This is the traditional lifeline for the indigent hack, or at least it used to be. Jeffrey Bernard, my sort-of predecessor, would just sit in the Coach and Horses, and sooner or later, after he had put out a distress call in his column, in would come another woman who saw romance in the life of the penniless barfly, and he would be OK again for a while. However, he was writing in the Spectator, which tends to circulate among people with money. I can’t pull the same trick off here, for obvious reasons.

I also wonder if something has changed in the nature of wealth. People who have the stuff these days generally don’t pass it on to people who don’t. The days of the patron are over. What they pass on instead is either impertinent and unwanted advice or simply a dirty look. (Naturally this does not include those kind souls who have been kind enough to help me out towards the end of awkward months in the past.)

But I had my time in the sun for a while, and very pleasant it was, too. I could have saved up the modest book advance for a rainy day but as far as I can see it’s always a rainy day around the Hovel, so what the heck, I thought. Also, it would be very much not in the spirit of the Prix Goncourt or the Jack Trevor Story Memorial Cup, the terms of which dictate that the prize money must be spent in two weeks with nothing to show for it.

I was awarded the Jack Trevor Story prize last year – or possibly the year before that, it’s all a bit hazy – and I like to think that I maintain a standard of fecklessness whether I’m being rewarded for it or not. And the sum involved, I should add, is not big, and two-thirds of it is being withheld until the book is written, and then published.

It’s a fair deal, though, and I’m not grumbling. I have made my bed, and I must lie in it, although I didn’t realise that it would have so many Rice Krispies in it. You try eating cereal in bed without spilling any. The only real problem with doing so, it occurs to me, is that I don’t think there are many women, rich or not, who would be attracted by the prospect of sharing a bed with me and my breakfast. And I can’t say I blame them.

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 12 January 2017 issue of the New Statesman, Putin's revenge