Pound traders who held on during this year’s pasting have little to look forward to next week.
After falling to the lowest level in 5 1/2 years against the dollar on Friday, the U.K.’s currency may struggle to catch a break next week as reports are forecast to show inflation remained close to zero, wage growth slowed and retail sales dropped in the nation.
Sterling also weakened versus the euro, declining for an eighth consecutive week, its longest slide since 1999, as signs of weakness in the domestic economy and global shocks from China took the shine off Britain’s currency.
The Bank of England kept interest rates unchanged at a record low on Jan. 14, citing a weakening outlook for growth and inflation. The 10-year break-even rate, which acts as a gauge of the bond market’s outlook for U.K. price growth, dropped to its lowest level since 2009 following a slump in oil prices to the least in 12 years.
Commerzbank AG cut its forecasts for the pound Friday to $1.46 at year-end and $1.50 at the end of 2017, compared with earlier predictions of $1.52 and $1.53, respectively.
“The fall in oil prices and the decline in the pound simply has to be reflected in the forecasts,” said Esther Reichelt, a Frankfurt-based strategist at the German bank. “It’s nothing the Bank of England can ignore and recent data are rather disappointing. The headwinds to the British economy have definitely increased.”
The pound fell 1.6 percent in the week to $1.4289 at 5:12 p.m. London time Friday, after touching $1.4279, the least since May 2010. Sterling weakened 2 percent to 76.83 pence per euro.
The U.K. currency was undercut by banks pushing out their expectations for when the BOE will raise interest rates. The prospect of an entrenchment of record-low rates and a possible British exit from the European Union has added to the risks stacking up against the pound, which has seen banks across Europe slashing their forecasts. BOE Governor Mark Carney is scheduled to speak on Jan. 19.
The annual inflation rate will rise to 0.2 percent in December from 0.1 percent the previous month, according to the medium forecast of economists surveyed by Bloomberg. Weekly earnings will slow in the three months through November, while retail sales are forecast to have contracted last month, surveys show.
“We expect retail sales to come in weaker than expected, but importantly there is also the dynamics of earnings to be looked at,” said Roberto Mialich, a senior foreign-exchange strategist at UniCredit SpA in Milan. The market expects wage growth to decline “so clearly the near-term future for sterling will worsen and remain weak,” he said.
U.K. government bonds advanced this week. The 10-year benchmark yield fell 11 basis points, or 0.11 percentage point, to 1.66 percent. It touched 1.63 percent on Friday, the lowest since April. The 2 percent gilt due in September 2025 rose 0.96, or 9.60 pounds per 1,000-pound face amount, to 102.995.
British Petrol Stations Run Dry as Truck Driver Shortage Disrupts Supply Chain
Gas station pumps ran dry in major British cities on Monday and vendors rationed sales as a shortage of truckers strained supply chains to breaking point in the world’s fifth-largest economy.
A dire post-Brexit shortage of lorry drivers revealed as the COVID-19 pandemic eases has sown chaos through British supply chains in everything from food to fuel, raising the spectre of disruptions and price rises in the run up to Christmas.
Drivers queued for hours to fill their cars at gas stations that were still serving fuel, albeit often rationed, and there were calls for National Health Service (NHS) workers to be given priority, to keep hospitals open as the pandemic continues.
“As pumps run dry there is a real risk that NHS staff won’t be able to do their jobs, and provide vital services and care to people who urgently need it,” said Dr Chaand Nagpaul, the British Medical Association’s council chair.
Pumps across British cities were either closed or had signs saying fuel was unavailable on Monday, Reuters reporters said, with some limiting the amount of fuel each customer could buy.
The Petrol Retailers Association (PRA), which represents independent fuel retailers which now account for 65% of all UK forecourts, said members had reported that 50% to 90% of pumps were dry in some areas.
“We need some calm,” Gordon Balmer, executive director of the PRA, who worked for BP (BP.L) for 30 years, told Reuters. “Please don’t panic buy: if people drain the network then it becomes a self-fulfilling prophecy.”
Royal Dutch Shell (RDSa.L) said it had seen higher than usual demand for fuel across its British network and that some sites were running low on some grades of fuel.
Environment Secretary George Eustice said there was no shortage of fuel, urged people to stop panic buying and said there were no plans to get the army to drive trucks, though the Ministry of Defence would help with trucker testing.
Hauliers, gas stations and retailers warned that there were no quick fixes, however, as the shortfall of truck drivers – estimated to be around 100,000 – was so acute, and because transporting fuel demands additional training and licensing.
For months, supermarkets, processors and farmers have warned that a shortage of heavy goods vehicle (HGV) drivers was straining supply chains to breaking point – making it harder to get goods onto shelves.
Amid warnings of a dire winter ahead, some politicians in the European Union linked the supply chain stress to the 2016 Brexit referendum and Britain’s subsequent decision to seek a distant relationship with the bloc.
“The free movement of labour is part of the European Union, and we tried very hard to convince the British not to leave the Union,” said Olaf Scholz, the Social Democrat candidate to succeed Angela Merkel as German chancellor.
“They decided differently. I hope they will manage the problems coming from that,” Scholz said.
British ministers have insisted that Brexit is nothing to do with the current trucker shortage, though around 25,000 truckers returned to Europe before Brexit. Britain was also unable to test 40,000 drivers during COVID-19 lockdowns.
Edwin Atema, the head of research and enforcement at the Netherlands-based FNV union, told the BBC that EU drivers were unlikely to flock to Britain given the conditions on offer.
“The EU workers we speak to will not go to the UK for a short-term visa to help UK out of the shit they created themselves,” Atema said.
Africa Needs $2 Trillion for Green Manufacturing, McKinsey Says
Africa’s lack of industrial development puts it in a strong position to develop low-carbon manufacturing without the costs of transitioning from fossil fuel-based factories, McKinsey & Co. said.
In the process of striving toward net-zero emissions by 2050, the continent could create a net 3.8 million jobs, McKinsey said in its Africa’s Green Manufacturing Crossroads report, which was partially funded by the U.K. government and released Monday. However, to hit that level would require investment of $2 trillion in manufacturing and power.
“Africa has an opportunity to leapfrog high emitting manufacturing technologies and build a low-carbon manufacturing sector from the ground up,” Kartik Jayaram, a senior partner in McKinsey’s Nairobi office, said in a statement accompanying the report. “Africa could avoid future costs by sidestepping the expensive transition from fossil fuels to renewables.”
Still, without any commitments to decarbonize emissions from manufacturing, Africa could almost double to 830 megatons of carbon dioxide equivalent by 2050, McKinsey said.
“To change this trajectory, decisive action would be needed,” McKinsey said.
Of the 440 megatons of carbon dioxide equivalent currently produced by African manufacturing, almost a third comes from cement and 13% is emitted by coal-to-fuel plants, which are operated by Sasol Ltd. in South Africa, the consultancy said.
To fund the development, African countries would need to tap green finance instruments such as carbon credits, green bonds, green insurance and payment for performance linked to green outcomes, Mckinsey said. To decarbonize existing industries, $600 billion would be needed while $1.4 trillion is needed for new green businesses, the consultancy said.
Carbon capture and storage and the production of green hydrogen are two technologies that could help the continent attain the target, it said.
New industries that could be developed range from bioethanol and cross-laminated timber to electric vehicles and green hydrogen, McKinsey said.
UNGA 2021: The World has the Resources to End Hunger, African Development Bank Head tells UN Food Systems Summit
“The world has the resources to end hunger,” African Development Bank President Dr. Akinwumi A. Adesina said in a message on the first day of the United Nations Food Systems Summit.
Convened by UN Secretary General António Guterres, the event is billed by its organisers as “a historic opportunity to empower all people to leverage the power of food systems to drive our recovery from the COVID-19 pandemic and get us back on track to achieve all 17 Sustainable Development Goals (SDGs) by 2030.”
The summit brings together thousands of youths, food producers, members of civil society, researchers, the private sector, women and indigenous people, all of whom are participating both physically and virtually in the summit. It is taking place on the sidelines of the 76th UN General Assembly in New York.
In his opening address, Guterres said the participants represented “energy, ideas and the willingness to create new partnerships,” and was a time to celebrate the dignity of those who produce and create the world’s food.
Decrying the 246 million people in Africa who go to bed daily without food and the continent’s 59 million stunted children as “morally and socially unacceptable,” Adesina said that delivering food security for Africa at greater scale called for prioritising technologies, climate and financing.
“The $33 billion per year required to free the world of hunger, is just 0.12% of $27 trillion that the world has deployed as stimulus to address the Covid-19 pandemic. I am confident that zero hunger can be achieved in Africa by 2030,“ Adesina said.
The African Development Bank’s Feed Africa Strategy, through its Technologies for African Agricultural Transformation program – widely known as TAAT – has provided 11 million farmers across 29 African countries with proven agricultural technologies for food security. Food production has expanded by 12 million metric tons while saving $814 million worth of food imports.
“We are well on our way to achieving our target of reaching 40 million farmers with modern and climate-resilient technologies in the next five years,” the African Development Bank chief added.
At a meeting on food security in Africa organized by the Bank and the International Fund for Agricultural Development (IFAD) earlier this year, 19 African heads of state called for the establishment of a facility for financing food security and nutrition in Africa.
“The Facility for Financing Food Security and Nutrition in Africa should be capitalized with at least $ 1 billion per year,” Adesina said.
The welfare of the 70% of Africa’s population working in agriculture and agribusiness is a barometer of the state of the continent’s health. “If they aren’t doing well, then Africa isn’t doing well,” Rwandan president Paul Kagame said in a message at the official opening.
The many other heads of state and government who spoke on Thursday included, Prime Minister Mario Draghi of Italy, President Felix Antoine Tshisekedi of the Democratic Republic of Congo, Prime Minister Sheikh Hasina of Bangladesh and Prime Minister Jacinda Arden of New Zealand.
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