The British Pound still moves up and down like the proverbial fiddler’s elbow. Having touched a low of USD1.3087 during the London morning, the so-called ‘cable’ rate managed to rally almost a full cent to a high of 1.3178 before closing in New York around 1.3170. Official statistics Tuesday showed that CPI inflation in the UK was steady at 3.0% y/y in October rather than the 3.1-3.2% consensus of analysts’ expectations. This was important for several reasons: it continues the squeeze on real earnings (wages are growing only around 2% y/y) but it calls into question both the BoE’s recent decision to raise interest rates and undermines the arguments for any further tightening of monetary policy.
Despite these headwinds, the GBP improved steadily throughout the Northern Hemisphere day, little troubled by the latest political squabbles in the UK. Giving evidence to the House of Commons Business Committee, the Head of Honda UK said said it relied on 350 trucks a day arriving from Europe to keep its UK factory operating, with just an hour’s worth of parts being held on the production line. In an elegant piece of understatement, he said, “I wouldn’t say that the just-in-time manufacturing model wouldn’t work, but it would certainly be very challenging.” Wednesday in the UK brings the latest official data on unemployment and average earnings, with the wages rather than the jobless number likely setting the tone for the GBP.