Another false dawn for Sterling? – 19th October 2016

Another false dawn for Sterling? – 19th October 2016

So far this morning, Sterling has had a little rally however, don’t get too carried away there have been several false dawns of late. This time last week, Sterling had had a good day against the Euro and US Dollar, gaining half a cent on the day, only to lose that much and in the two days that followed.

Yesterday ecostats focused on inflation and employment with the CPI measure from the UK showing a jump from 0.6% to 1.0%; the US number came in at 1.7%. The employment numbers from the UK showed the jobless rate is at 4.9%, the 11-year low, and that wages increased by 2.3%. In the US, the jobless rate is also 4.9% however, strangely, the participation rate is beginning to move up from a relatively low base of 65%. It is very strange that the US and UK produce similar headline unemployment numbers circa 5% and yet participation in the US is about 65% whereas the figure for the UK is nearer 75%.

Further doubts were cast over the Euro project yesterday when Otmar Issing, one of the senior founding architects of the Euro, warns that “it is in trouble one should pay attention to”. His best hope for the Euro was that it would continue to muddle through struggling from crisis to crisis. His most serious and perhaps concerning remark was that the ECB has “fatally compromised the system” by bailing out bankrupt states in “palpable violation of the Treaties”.

He was further reported as saying that the Stability and Growth Pact had more or less failed, with discipline done away with by ECB interventions that have taken away fiscal control mechanisms from markets and politics. Harsh words indeed and nobody likes the truth!