WEEKEND WEB: US dollar renews its rally cry

Money Matters, by Scott Woods
Money Matters, by Scott Woods
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Scott Woods gives his weekyl view of the global finance markets in Money Matters.

The US dollar began to bounce again, amid investor hopes that the Trump administration will manage to pass some tax cuts in Congress and might pick a new central bank chief who favours raising interest rates more rapidly than the incumbent.

Higher interest rates make the dollar a more attractive asset to hold for investors. Meanwhile, the pound slipped on further signs of weakness in the UK economy and amid reports of scant progress in Brexit talks. Stock markets worldwide advanced in sterling terms, led by the US, while UK company shares were little changed.

• After five rounds of negotiations, UK talks on exiting the EU have fallen behind schedule. Negotiations on future trade, which Prime Minister Theresa May had hoped would start this autumn, now look unlikely to kick-off until December at the earliest.

The dispute is, predictably, over money. May is thought to be willing to stump up around €20bn to the EU budget in 2019 and 2020, but the European Commission wants further commitments. Sterling has fallen 3.2% against the US dollar since mid-September, but is still up 9.6% year to date, having recovered some of its losses since the referendum.

• The Chinese economy grew by 6.8% in the third quarter of the year, keeping the country on track for its first year-on-year acceleration in growth since 2010. The economy expanded by 6.7% in 2016. This is good news for President Xi Jinping as he seeks to consolidate power; growth numbers were released in the midst of the country’s five-yearly Communist party congress. It wasn’t all plain sailing, though: data showed Chinese residential property sales fell in September for the first time in two-and-a-half years, while investment growth has dropped to its lowest level in almost two decades.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.