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Britain’s soaring pound is this year’s unlikely comeback story


Just a few months ago, it was a no-brainer to bet against the British pound.

Talk about the currency tumbling to US dollar parity was everywhere during Liz Truss’s disastrous premiership. Hardly anyone was optimistic about a country on the brink of its longest-ever recession.

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But the bleak views are proving to be overstated, at least for now. The pound has roared back this year, delivering the best performance of any major developed currency.

Strategists are turning more positive too, with Nomura Holdings Inc., NatWest Markets Plc and HSBC Holdings Plc saying the rally will continue.

“The reality is, things aren’t as bad as everyone worried they would be,” said Dominic Bunning, head of European FX research at HSBC. “It’s only now that people are starting to wake up to this idea.”

To be sure, the UK economy is not in good health. Inflation remains sticky and the International Monetary Fund said last week that Britain is likely to suffer one of the biggest rises in unemployment amid an economic contraction.

But after eleven back-to-back interest-rate hikes, the pound is an appealing destination for investors compared with the dollar, as US traders position for the Federal Reserve to reduce rates already this year.

The pound is up nearly 5 percent against the dollar on a total returns basis, which factors in interest as well as price moves, data compiled by Bloomberg show. Sterling briefly hit a 10-month high of $1.2546 on Friday.

Back in November, the Bank of England pushed through its biggest interest-rate increase in 33 years, accompanied by dire predictions about the economy.

Now, recent data including surging retail sales and stabilizing house prices suggest the blow isn’t so deep, and the BOE is no longer expecting a contraction this quarter.

UK credit conditions not as bad as expected, Deutsche Bank says risks remain

Not everyone is convinced that the pound’s run can continue.

Valentin Marinov, head of G10 currency research at Credit Agricole SA, sees a return to $1.23 or lower by the end of the quarter.

Consumer confidence remains weak even after bouncing off October’s record low, with the threat of higher mortgage rates still looming for many households.

“Despite the fact that the UK outlook is now less dire, I think that the Monetary Policy Committee will remain divided on the need for further aggressive rate hikes,” he said. A “less-dovish-than-expected pivot by the Fed, as well as fears over a global recession, could also weigh on sterling as risk appetite wanes,” he added.

While a reduction in short positions on the pound is a symptom of the broader optimism in UK markets, it could also leave the currency more vulnerable to negative shocks if fresh cracks emerge, according to Jane Foley, head of FX strategy at Rabobank.

She sees the pound trading in a range of $1.20 to $1.26 in the coming six months.

“There has been a repricing from a hideously gloomy outlook for the UK to just a gloomy outlook,” she said. “Has the market really got the momentum to lift cable significantly? I doubt it.”

The pound erased gains against the dollar on Friday after a US report showed sentiment improving and an index of one-year inflation expectations rising more than expected.

Nomura, NatWest and HSBC are more bullish and see the pound reaching $1.30 in the coming months.

As well as looming Fed rate cuts and continued dollar weakness, they also cite tentative optimism over the UK’s economic outlook, and a path toward further rate hikes as the BOE seeks to temper inflation that’s still in the double digits.

While inflation has nearly halved from its peak in the US, economists polled by Bloomberg see the UK’s March year-on-year reading — due this week — at 9.8 percent.

The BOE’s Chief Economist, Huw Pill, said the UK could experience a “positive demand shock, a boon for the nation’s lackluster growth, but potentially adding pressure on the pace of price growth.”

Traders see more than 50 basis points of additional hikes from the UK’s central bank this year compared with just 21 basis points from the Fed.

“The planets are aligned for the pound to break higher,” NatWest strategists wrote in a recent note. The currency is supported by a “fast-dwindling set of potential risks around the UK outlook,” they said.

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Crown Prince of Abu Dhabi meets with CEOs of leading Norwegian companies

H.H. Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, has met with a group of CEOs from leading Norwegian companies, as part of their participation in the UAE-Norway Investment Forum, held alongside his official visit to the Kingdom of Norway.

During the meeting, H.H. Sheikh Khaled bin Mohamed bin Zayed underscored the UAE leadership’s commitment to strengthening economic cooperation with its international partners.

He highlighted that investment in innovation and knowledge is a cornerstone for achieving sustainable development, noting that enhancing collaboration with Norwegian companies across key sectors will open new avenues for mutual economic growth between the two countries.

The UAE-Norway Investment Forum, taking place in Oslo, aimed to highlight available investment opportunities and strengthen trade relations between the UAE and Norway, fostering shared interests and supporting innovation and knowledge-based economic visions.

-wam

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At the Indonesia International Book Fair 2024, TRENDS inaugurates 10th global office, releases four books

As part of its Asian research tour, partnership with Aletihad News Center, and
primary sponsorship of the Indonesia International Book Fair 2024, TRENDS
Research & Advisory inaugurated its office in Jakarta, marking its 10th location
worldwide. It also released four books in Indonesian.
The inauguration event was attended by ambassadors of the UAE, Bahrain, and
Jordan to Indonesia, chairpersons of the UAE and Indonesian Publishers’
Associations, the Director of TRENDS’ Jakarta office, and a group of researchers
and academics.
Speaking at the event, Dr. Mohammed Abdullah Al-Ali, CEO of TRENDS
Research & Advisory, stated that TRENDS’ international offices—set to reach 15
by the end of 2024—aim to enhance the Center’s research efforts and deepen its
role in disseminating knowledge, thus serving as a global knowledge bridge.
He emphasized, “At TRENDS, we believe in the importance of cooperation
between think tanks and prioritize this endeavor. We believe the TRENDS office in
Jakarta will enhance the exchange of knowledge and ideas between think tanks in
Asia and the Middle East, opening new horizons for collaboration in various
fields.”

Four books in Indonesian
As part of the Jakarta office’s inaugural activities, four books were released in
Indonesian, including the 11th and 12th books of the Muslim Brotherhood
Encyclopedia and Global Trends in AI and Automation and the Future of
Competition between Man and Machine: An Analytical Forward-looking Vision.

Hostility to Arab states
The 11th book of the Muslim Brotherhood Encyclopedia, The Concept of the State
According to the Muslim Brotherhood, highlights its hostile stance toward Arab
states since its inception. The group views them as an obstacle to its ascent to
power. It opposed the modern principles upon which these states were built,
considering them incompatible with the group’s unique interpretation of Islam,
which it claimed to embody exclusively.

Exclusion of nonconformists
The 12th book, The Muslim Brotherhood: Rejection of Tolerance and Exclusion of
Nonconformists, examines the Muslim Brotherhood’s stance towards
nonconformists, individuals, and entities. The book reveals the group’s binary view
of the world, categorizing others as allies or adversaries. It ties these relationships
to the Brotherhood’s internal power struggles and self-serving interests.

Global Trends in AI
The third book, Global Trends in AI, explores significant developments in AI and
its impact on various aspects of life, including the economy, society, and
governance. It also offers a comprehensive analysis of technological advancements
in AI, its applications across sectors, the ethical and social challenges it presents,
and its future trajectory.

Automation

The fourth book, Automation and the Future of Competition between Man and
Machine: An Analytical Forward-looking Vision, addresses the growing challenges
faced by the human workforce in the face of widespread automation and AI
applications. The book concludes that while automation presents a significant
challenge to the labor market, it simultaneously creates new opportunities. It
emphasizes the importance of preparing for this shift through skills development,
continuous education, and adopting economic and social policies that support the
workforce.

Prominent pavilion and active presence
The TRENDS’ pavilion at the Indonesia International Book Fair has attracted
numerous visitors, including academic researchers and officials, such as the
ambassadors of the UAE, Bahrain, Qatar, Jordan, and Turkey. Additionally,
chairpersons of Arab and Indonesian publishers’ associations, authors, publishers,
and students visited the pavilion. All were impressed with and praised TRENDS’ diverse, valuable publications. They also commended TRENDS’ active
international presence and ability to address global developments with rigorous
analytical research.
Dr. Mohammed Abdullah Al-Ali honored the esteemed guests, including
ambassadors of the UAE and Bahrain to Indonesia, Wedha Startesti Yudha,
Chairperson of the Indonesia International Book Fair Committee, Arys Hilman
Nugraha, Chairman of the Indonesian Publishers Association, and others,
presenting them with TRENDS’ publications and commemorative shields.
Additionally, he awarded TRENDS’ Research Medal to Ni Made Ayu Martini
Indonesian Deputy Minister of Marketing, Tourism and Creative Economy
It is worth noting that during its current Asian research tour, TRENDS announced
the launch of the TRENDS Research Medal, awarded to individuals who make
significant contributions to the development of scientific research and promote collaboration with TRENDS in strengthening a culture of research across various fields.

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US determined to prevent full-scale war in Middle East, Joe Biden tells UNGA79

US President Joe Biden highlighted the US Administration’s determination to prevent a wider war that engulfs the entire Middle East region, noting that a diplomatic solution “remains the only path to lasting security to allow the residents from both countries to return to their homes on the border safely”.

In remarks he made today before the 79th Session of the United Nations General Assembly (UNGA79), the US President said, “Full-scale war is not in anyone’s interest,” adding that a diplomatic solution is still possible.

He also touched on “the rise of violence against innocent Palestinians on the West Bank”, and the need to “set the conditions for a better future”, which he said featured “a two-state solution, where the world — where Israel enjoys security and peace and full recognition and normalised relations with all its neighbours, where Palestinians live in security, dignity, and self-determination in a state of their own”.

President Biden underscored the ceasefire and hostage deal put forth by Qatar and Egypt, which the UN Security Council endorsed. He said, “Now is the time for the parties to finalise its terms, bring the hostages home,” adding that this would help ease the suffering in Gaza, and end the war.

-WAM

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