Rocky outlook for sterling
Challenging the bank
The snappily-named Information Technology and Innovation Foundation encourages new ways of thinking about the effects of technology. But only certain ways: The foundation has nominated Elon Musk and Stephen Hawking as Luddites-of-the-year for their warnings that artificial intelligence could pose a threat to mankind. (As could the EU referendum to sterling.)
Whilst the German government has admitted some sympathy for Britain's misgivings about paying benefits to immigrants the moment they arrive, Angela Merkel's coalition partners "don't want a British Europe". The prime minister's lack of progress in garnering support for EU reform is leading investors to worry that the promised plebiscite could deliver a vote to leave the union. And that prospect does not fill them with glee.
Investors are also conscious that a sterling interest rate increase this year is no longer a done deal. Continued downward pressure on prices could delay the return of inflation to its 2% target and fiscal tightening by the chancellor would, in the opinion of Deutsche Bank economists, make it "challenging" for the Bank of England to raise rates.
The pound was unchanged, on average, against the other dozen most actively-traded currencies over the Christmas break. The two biggest movers were the NZ dollar, which led the way with a 0.8% gain, and the South African rand, which moved by the same proportion in the opposite direction.
Sterling was unchanged - or almost so - against the US and Australian dollars, the yen and the Swiss franc. It lost a quarter of a cent to the euro and gained half a cent from the Canadian dollar. It is, of course, quite usual for exchange rates to be relatively static when financial markets are closed. Even though Japan remained open, investors tend to stay out of it when London and New York are shut.
The yen was therefore unaffected by Japanese data at the end of last week which showed inflation steady at 0.3% and unemployment a touch higher at 3.3%. Figures released by Tokyo yesterday put industrial production -1.0% lower in November and retail sales fell by -2.5% in the same month.
The line-up of ecostats for this three-day week is predictably short. Today's modest contributions come from Spain, Sweden and the United States. It will leave plenty of time for investors to work out which way to jump in January.
This is the time of year when the heavyweight economics teams publish their predictions for the year ahead. At least two of them - Barclays and Deutsche - agree on a couple of things: the euro will fall to parity with the US dollar and the pound will lose ground to both.
Deutsche says sterling "is the most expensive currency out there at the moment - even including the dollar". The bank is looking for Cable to touch lows of $1.27 next year and $1.15 in 2017 if the Bank of England does not increase interest rates.