Finally, inflation is also falling sharply in the United Kingdom.
In October, it stagnated compared to the previous month and no longer exceeded 4.6% over one year, against 6.7% the last month. Excluding energy and food, the decline is less noticeable. Inflation was still 5.7% - against 6.1%. But this is not enough to cool investors' enthusiasm. Until now, they felt that a further rise in UK policy rates was still possible.
But in the face of these figures, the chances of such an outcome are dwindling considerably and, as is the case for the United States, the markets are now watching for a first fall in key rates in 2024.
So far, the hope of seeing the rate differential between the United Kingdom and Europe or the United States increase has helped support the British currency, which has remained at a small gain of 1% against the euro since the beginning of the year. But the sharp decline in inflation means these expectations on the bond front are likely to be disappointed. The pound is, therefore, stagnating against the euro over the week, and, at this stage, its potential for appreciation seems limited.
In the face of the UK's challenging environment, we reserve UK equities for dynamic portfolios only for investors with limited risk aversion.