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Bank of England keeps all things steady.

By Hamish Muress

With the year wrapping up there were no surprises at the end of it from the Bank of England as they decided not to change the precedent of altering rates at the end of the year. The vote was unanimous across the bank to keep rates at 0.75% whilst the forecasts had a slightly dovish tilt as they were revised down for growth and inflation. Unsurprisingly as well the bank warned that the greatest threat to growth at the moment comes from Brexit uncertainty. The other news beyond the carnage at Gatwick airport was that Parliament has confirmed that the debate on Brexit will begin on January 9th.

It’s been a tumultuous year for sterling, trading above the dizzying heights of 1.40 back in April before sinking to the current lows we see at the moment. We’ve had Chequers Agreements, cabinet reshuffles, resignations, the Beast from the East and even a World Cup Semi Finals. The last shows that anything can happen and there is raft of events next year that could do the same.

Whilst UK lawmakers take a long break over Christmas, their US counterparts are busy trying to keep their federal government open and operating. Once every 18 or so months the US government reaches a cliff edge as they scramble to organize a stop gap funding bill. The crux of the issue is a disagreement over the border wall that Donald Trump pledged to build (and force Mexico to fund) in his campaign during 2016. The issue is that the Democrats aren’t having any of it and will not add any funding to the bill that goes towards the wall meanwhile Trump announced he would not sign any bill without it. An impasse is likely but at least the President and US Congress can look to the UK for advice…oh wait.

The Euro continued its strong week as Italian budget headwinds reduced alongside the weakness seen against the USD. EUR/USD has rallied 1.75% this week however the currency pair as recently as November was trading north of 1.15. This morning’s French consumer spending numbers threw up a bit of a surprise with Black Friday failing to lift numbers despite the fact that households were given a boost in October due to a tax cut. French GDP figures could well set the tone for the rest of the Eurozone and the strong performance at the start of the year could be dampened by H2 particularly due to the disruption seen in Paris recently. The risk for the Euro at the start of next year could come in the form of week GDP numbers. Merry Christmas.

The Aussie dollar managed to hold some ground against the USD overnight despite the fact that US-China trade progress took a back seat given the other events unfolding in Washington. That’s it for the Australian dollar now and much like the rest of the currencies there isn’t much more to watch out for on the economic calendar before the end of the year. Next up – trade balance on the second Tuesday.

Everything is geared towards today’s GDP release from Canada which will prove the highlight of the day in North America (US government shutdown aside). Growth slowed unexpectedly at the end of the summer and with the recent drop in oil prices the Bank of Canada could be put on hold next year. The central bank went through a rich vein of from over the last 18 or so months, hiking rates 5 times however things may cool in 2019.

New Zealand consumer confidence picked up at the end of the year, turning in its strongest result since March 2018. Whilst the release failed to set the New Zealand dollar a light (difficult given that many investors have clocked off for the year) it did provide a fresh update for the New Zealand economy with growth forecast around 2.5%.