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UK

Global Macro Comment — SEK undervalued and USD overvalued

Although it is widely accepted that exchange rates vary substantially and are difficult to forecast, models based on economic fundamentals can track the evolution of the exchange rate rather well in the long run. Deviations between the actual and the estimated equilibrium exchange rates may be sustained for fairly long periods, but the exchange rate eventually tends to experience a correction toward its equilibrium lev-el. Our new fair value model indicates that the USD is currently overvalued, while the EUR, GBP and CNY are broadly in line with fundamentals and the JPY, NOK and the SEK are undervalued. Our fair value es-timate for USD/SEK is 7.5 and 9.5 for EUR/SEK.

Anders Bergvall, Senior Economist | anbe83@handelsbanken.se

Global Macro Forecast — Global economy on shaky ground

• A downturn is imminent
• Time for politicians to step up
• Interest rates remain low

Lena Fahlén, Head of Economic Research | leli15@handelsbanken.se

UK Comment — Consumer price inflation fell as expected in December

  1. CPI and core CPI of 2.1% and 1.9% respectively
  2. Inflation just above the 2% target
  3. Bank of England on the sidelines

Kiran Sakaria, Junior Strategist | kisa02@handelsbanken.se

UK Comment — Bank of England in Brexit wait-and-see mode

  1. Policy rate unchanged at 0.75%; QE program also unchanged
  2. BoE says future monetary policy will depend on Brexit and could be in either direction
  3. We believe Brexit will force the BoE to stay on hold for the next two years

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no

UK Comment — Theresa May survives vote of no confidence by a solid margin

  1. Theresa May will stay on, as 200 MPs voted for her, but will step down before 2022 election
  2. All Brexit outcomes still on the table, ranging from reversing Brexit to a no-deal Brexit
  3. Uncertainty will linger for a long time yet, dampening economic activity and weighing on the pound

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no

UK Comment — UK manufacturing PMI improves in November, but underlying weakness intensifies

  1. Production lifted by stockpiling on Brexit fears
  2. Export orders continue to fall
  3. Sentiment still points to decelerating output growth

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no