Economy

If you’re feeling broke and miserable after party season, the possibility of earning free international travel and luxury hotel stays is pretty tantalising. I’m talking, of course, about credit cards points that can be exchanged for travel perks and all manner of other goodies. With current deals particular appealing in drizzly January, you may well be tempted to apply for one — and lots of you have been asking me if I think they’re worth it.The short answer is “probably not” — unless you’re wealthy, self-disciplined and are totally on it with your finances. But the richer you are, the better the payback could be. Readers in the US are the most richly rewarded when it comes to points deals — there are countless offers, and it’s much more common for consumers to have a fistful of different credit cards. The generosity of UK deals is limited by the cap on interchange fees (the charges that merchants pay to accept cards, which in effect fund the rewards). However, the current welcome offer for new UK customers taking out an Amex Platinum card is its biggest ever, with the potential for them to bag up to 100,000 Amex membership rewards points. Depending on what you choose to exchange them for, this could net you a £500 gift card, or enough Avios points for a return flight from London to New York, plus a host of other perks such as money off in Harvey Nicks and selected posh restaurants. The main downside is the £650 annual fee. The Amex Gold card has no fee for the first year, and currently offers up to 30,000 reward points, four airport lounge passes and up to £120 of Deliveroo credit (you have until 9pm on Tuesday if you want to take advantage of either deal). It’s tempting — but more frugal readers will be horrified at the spending torrent that could be unleashed by signing up to such a card. To gain the maximum amount of points, Platinum card holders need to channel £10,000 worth of spending through their card in the first six months. Gold customers must spend £3,000 within three months. So for the deal to be “worth it” you’d need to be able to afford to spend £1,000-£1,700 a month on lifestyle purchases in places that accept Amex, and, crucially, clear your balance every single month without fail. I cannot stress this last point strongly enough. If you carry a balance, fearsomely high rates of interest await (31 per cent on Amex purchases) which will wipe out the value of any points. If you pay interest on your credit cards, forget rewards and get a specialist low-rate card instead (listen to this week’s Money Clinic podcast for more). You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.I am not naturally a high spender, as regular readers of this column well know. Do I want a card in my wallet or phone that psychologically tempts me to spend more, plus an app stuffed with yet more spending-linked discounts at bougie brands? Not on your nelly! I’d rather keep a lid on the lifestyle creep and max out my monthly pension and Isa investments. However, I recognise that many FT readers have different ways of wringing enjoyment from their hard-earned cash. The good news for them is that seriously high earners (and spenders) who travel a lot have the most to gain from points deals.I spent a pleasurable hour this week travelling down the rabbit hole of point collecting with Rob Burgess, editor of HeadforPoints.com, the frequent flyer website.Aside from the points you would get for signing up, the value of the points you can earn for taking flights and staying in hotels — particularly if you travel for work and are enrolled in a frequent flyer or hotel loyalty programme — has to be taken into consideration.“If you don’t travel for work but maximise sign-up deals and other promotions, a solo traveller would be able to earn enough for one long-haul business class flight every 12-18 months,” he says. Another popular perk for couples is the British Airways Amex card with its annual “2-4-1” voucher.The Head for Points website is stuffed with articles about squeezing the maximum from your Avios and hotel points. People obsess over this stuff!“One reason why the better-off tend to like point-collecting as a hobby is because the more premium the cabin you travel in, the better value your points will be,” he reveals. For example, a first-class fare could be 15 times the price of an economy fare, but if you buy a flight with points, you’ll only need roughly four times as many. “If you’re the sort of person who would only ever fly business class to New York as a special treat, then you’re not really saving the £2,000 cost of the air fare if you use points,” he says. “However, if you are the kind of person who flies business class everywhere, then it is a genuine saving.”The same goes for the perks used to justify the high annual membership fees on these kinds of cards, such as entrance to airport lounges, travel insurance policies and so on. If this is something that you would pay money for anyway, then it could be worth it. Burgess’s other top tips? Wait for introductory deals. Virtually all travel reward cards run enhanced sign-up deals a couple of times a year. Being patient could net you up to 25,000 extra Avios. When applying, don’t add a supplementary card for your partner. After a month or so, he says, most card providers will offer extra bonus points if you add an additional card holder. Sort Your Financial Life Out with Claer BarrettLearn how to make smarter money decisions and supercharge your personal finances in this six-part newsletter series with the FT’s Claer Barrett. From saving and investing to property and pay rises, she’ll inspire you to get more confident with your money.While travel-related cards have become more generous, you may have noticed, like me, that points deals on John Lewis, M&S and supermarket-backed credit cards have become less so. Spend £500 on these sorts of cards, and Burgess estimates you’ll get the equivalent of £1 to £2 back in vouchers.His tip for people like me was getting the (fee-free) Barclaycard Avios Mastercard. As someone who has taken one international flight since 2019, collecting Avios has always seemed pretty pointless. However, if I convert my Avios to Nectar points, I can spend them in Sainsbury’s — and putting £300 through my credit card would net me £2 worth of points.If you’re the kind of person who turns left on a flight, points deals are well worth checking out. For the rest of us, aspiring to the kind of lifestyle most people can only dream of could seriously dent your long-term financial prospects. Claer Barrett is the FT’s consumer editor and author of the FT’s Sort Your Financial Life Out newsletter series; [email protected]; Instagram @ClaerB More

BENGALURU (Reuters) – Most emerging-market currencies are set to regain their recent strength later this year after some near-term paralysis as expectations of interest-rate cuts by the U.S. Federal Reserve keep the dollar in check, a Reuters poll found.These currencies have popped higher in the past few weeks, driven by market bets for aggressive rate cuts by the Fed this year, dragging down U.S. bond yields. Those bets have eased somewhat in the first days of 2024, but only slightly. The recent U.S. dollar sell-off has helped a wider index of emerging-market currencies gain nearly 3.5% since early November 2023.However, with the greenback’s recent slide predicted to be brief and the risks of mispricing future Fed rate cuts increasing, gains in EM currencies will be moderate at least in the first half of the year. [EUR/POLL]According to the Jan. 2-4 Reuters poll of 55 strategists, 11 of 15 EM currencies in the poll were forecast to gain against the dollar in 12 months, of which eight were predicted to recoup all of their 2023 losses.Still, with the timing of the Fed’s launch of its easing cycle still unclear, median three-month estimates for some EM currencies like the Turkish lira and Russian rouble were slightly weaker compared with last month’s poll.Chris Turner, ING’s head of FX strategy, said that while EM currencies should have a positive year overall, the start of 2024 may be difficult as “expectations for easier policy in the U.S. and Europe have probably come too far, too fast.” “But when it becomes clear in Q2 the Fed will indeed ease … that should be a pretty benign and positive environment for emerging-market FX.”A majority of EM currencies including the Chinese yuan, Indonesian rupiah, Korean won, Thai baht, Malaysian ringgit, Vietnamese dong and Taiwan dollar were expected to gain between 2.1% and 5.0% in a year. The Indian rupee was forecast to gain only about 1% to 82.50 per dollar in a year, barely changed from last month’s prediction. [INR/POLL]The Turkish lira, South African rand and Russian rouble were among the few currencies not predicted to recover all of their losses from 2023 this year. Another source of support for EM currencies comes from lower expectations of rate cuts not only by the Fed but by central banks in developing countries too, against a backdrop of reasonably stronger domestic economic growth. “We currently don’t forecast the Fed to cut by as much as what the market is pricing in … that would perhaps suggest some or more limited scope for this year for EM currencies to gain substantially,” said Mitul Kotecha, head of FX and EM macro strategy Asia at Barclays.”But probably as we go through the year we would maybe see some further upside for EM.”(For other stories from the January Reuters foreign exchange poll:) More

BENGALURU (Reuters) – The U.S. dollar’s recent slide appears to be short-lived as some speculators have already reduced bets for aggressive Federal Reserve interest rate cuts this year, according to a Reuters poll of strategists who still say it will be weaker in a year.Market expectations that the Fed will start easing policy as early as March were tempered when minutes from December’s policy meeting showed most policymakers agreed borrowing costs need to remain high for some time, suggesting a March cut is less likely. After the release, the dollar rose against a basket of currencies and is already up around 1% for the year following a 5% dip in the previous two months. Interest rate futures on Wednesday were pricing in a roughly 66% chance the Fed starts cutting in March, down from 87% a week ago, according to CME FedWatch. Any further pullback in bets is likely to give the currency a leg up in the near term.”In the short run, we think the dollar could gain a bit, mainly because we think the market is being too aggressive at pricing in Fed rate cuts…our base case is the Fed will wait until May before cutting,” said Brian Rose, senior economist at UBS Global Wealth Management.”We have seen the dollar rebounding a bit in recent days and the dollar could be stable or maybe a bit higher in the near term.”Making clear the dollar has not yet been decisively knocked off its perch, a majority of analysts, 36 of 59, said the greater risk to their three-month forecast was the dollar trades stronger against major currencies than they currently predict. The remaining 23 said the risk was it could trade weaker.However, most said the dollar will slip against major currencies in 12 months as the Fed’s latest dot plot predictions show three interest rate cuts by year-end. “Beyond the very short term, we still expect a further dollar decline to materialise this year as the deterioration in the economic outlook forces (a) large (amount of) Fed cuts,” said Francesco Pesole, FX strategist at ING.But any depreciation in the first half of this year will be moderate compared with the last couple of months, he said. The euro, which rose over 3% last year, its first yearly gain since 2020, was expected to capitalise on narrowing interest rate differentials and rise over 2% to trade around $1.12 in 12 months. It was trading at $1.09 on Thursday.Among other major currencies, the Japanese yen, which has dropped about 30% in the past three years, was forecast to gain 6.6% to change hands at around 135/dollar in a year.Sterling, which had a strong showing last year, gaining over 5.0%, was predicted to rise over 1.5% to $1.29 by year end. The Aussie and New Zealand dollars were expected to strengthen around 4% and 2.2%, respectively. (For other stories from the January Reuters foreign exchange poll:) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The overall boost to UK savers’ incomes from higher interest rates outstripped the impact of increased mortgage payments on households, according to new research from the Resolution Foundation think-tank. The Bank of England’s decision to raise rates between December 2021 and August 2023 resulted in a £16bn income boom for savers, the research released on Friday showed.Real income from savings rose by £34bn over the period — more than offsetting the £18bn rise in debt interest costs. The boon accounted for three-fifths of all household income growth since the last quarter of 2021, the research found. The think-tank said the windfall from higher interest rates was “unprecedented” in recent UK economic history and internationally but noted the gains had been higher for wealthier savers.“The impact of the unlikely income boost has been very uneven — older, asset-rich households have gained the most, while younger mortgagor households have been hit hard,” said Simon Pittaway, senior economist at Resolution Foundation. He also warned borrowing costs were “likely to reduce” income on savings in the year ahead “presenting a fresh living standards challenge in an election year”.In the past two years the central bank has raised rates from a historical low of 0.1 per cent to a 15-year high of 5.25 per cent in an attempt to combat surging inflation.The think-tank said the proportion of households on variable rates has been shrinking and that this had been a key driver of the income boom. With a higher proportion of households on longer-term fixed-rate deals the overall pass-through from interest rate rises to mortgage costs had slowed. Some 37 per cent of households that had a mortgage when the central bank started raising rates in 2021 were on fixed-rate deals which had not yet ended.The research also found that household debt would continue to rise in 2024, and around 1.5mn mortgagors will see their annual mortgage expenses rise by £1,800 on average when their fixed-rate deals end this year. In contrast with the delayed impact on mortgage costs, the gains from higher savings interest had been more immediate.The windfall was boosted by “forced savings” accumulated during the pandemic when parts of the economy shut down.UK savings have been falling back from their pandemic peak. The income boom for savers is expected to decline in 2024 as the trend continues, and could be almost completely unwound by the end of year even if the central bank starts to cut interest rates. Markets expect the BoE will start cutting rates from the spring to 3.75 per cent by the end of 2024. Similar rate-rising cycles have delivered only a modest income boost in the eurozone and an income fall in the US because of a surge in non-mortgage interest payments. More

BOGOTA (Reuters) – Colombia’s economy is forecast to grow 1.8% in 2024, while inflation is expected to slow to 5%, paving the way for the central bank to cut its benchmark interest rate to some 8%, Finance Minister Ricardo Bonilla said on Thursday.GDP growth for 2023 is expected to have reached 1.2%, he added, lower than the minister’s previous forecast of 1.8% late last year. Latin America’s fourth-largest economy sputtered through the previous year, while inflation has remained persistently high, hitting 10.15% for the 12 months through November. “We expect … that the path of economic growth in 2024 hits 1.8%, which is to say that gradually we are emerging from this global slowdown,” Bonilla said during an interview in capital Bogota. Inflation for the end of 2023 is expected to come in at around 9.5%, Bonilla said, a significant drop from the 13.12% recorded in 2022 but significantly greater than the central bank’s 3% target.A Reuters poll last week revealed that analysts expect inflation in 2023 to have reached 9.43%. “That inflation continues to decline slowly but surely means we won’t reach the (central) bank’s 3% goal in 2024; it will be reached in 2025,” Bonilla said.Lower inflation would allow the central bank to cut the benchmark interest rate from its current 13%.The government will hold talks with business leaders over President Gustavo Petro’s proposal to make changes to a fiscal reform – passed early last year – to shift tax burdens away from companies and onto wealthy individuals, Bonilla said.”We’re going to start a process of socialization with economic players, business associations etcetera,” the minister said, adding that any proposed changes would be sent to Congress for approval. Since passing the initial fiscal reform at the start of 2023, Petro’s government has struggled to push through a trio of subsequent projects to reform health, pensions, and work.Colombia’s government is only opening discussions concerning the fiscal rule – imposing limits on the fiscal deficit – which does not guarantee changes or plans to breach it, Bonilla said. The fiscal deficit goal for 2023 was 4.3% of GDP.The country will continue issuing bonds and seeking loans, but will try to push back some maturity dates to increase investments.”We are looking for new international … players to participate,” he said. More

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Asian markets must wait over the weekend to trade on U.S. December employment data, the first globally significant economic release of 2024 that comes out after they close on Friday. But if subdued U.S. trade on Thursday is any indication, investors will be content to keep their powder dry Friday. Wall Street tried to steady from its two-day selloff and the Dow eked out a gain for the second time this week. But there was no obvious inclination to resume the late 2023 buying spree, while Treasuries leaned toward risk-off, though not enough to hump benchmark yields decisively back over 4.0%. That underpinned the dollar, especially against the yen which also had a Nikkei selloff, an earthquake and a deadly aircraft collision to reckon with on its first day back from a holiday break.Against the yen JPY=, the greenback rose to two-week peaks, climbing for three straight days. The dollar was last up 0.9% at 144.52 yen.It rose against the Chinese yuan to 7.1776, reaching the highest price since December 13 in U.S. trade. The Australian dollar fell to its lowest price since December 18.Thursday’s ADP National Employment report showed U.S. private employers hired more workers than expected in December. Other reports showed the labor market cooling. The question for financial markets is whether Friday’s nonfarm payrolls release solidifies current futures betting on five or more rate cuts by the Fed, starting in March. The yield on 10-year Treasury notes US10YT=RR was up 8.8 basis points to 3.995%. Its yield, which moves in the opposite direction of prices, briefly traded above 4% Wednesday, but has not maintained that level since falling below 4% in mid-December. Yields of the benchmark 10-year are up about 15 basis points over the first three trading days of the new year.”The market is ahead of itself and is not listening to what the Fed is saying,” said Judith Raneri, a portfolio manager at Gabelli Funds. The yield on 10-year Treasury note was up 8.8 basis points at 3.995%. It has taken a couple halfhearted runs at clearing 4% this week but has not maintained that level since falling below it in mid-December. What that means today for JGBs and other Asian government debt is not glaringly obvious but Japanese yields did tick higher on Thursday in a catch up with Treasuries after the extended market holiday. In related news, Citigroup said it aimed to launch its China investment banking unit as early as the end of this year, with about 30 staff. Here are key developments that could provide more direction to markets on Friday:- Japan consumer confidence (December)- US Nonfarm Payrolls and Unemployment(December) More

The December jobs report hits Friday morning, with markets looking for a 170,000 increase in nonfarm payrolls and an unemployment rate of 3.8%.
Art Hogan, chief market strategist at B. Riley Financial, said the acceptable range is really something like 100,000-250,000.
“This is a market that’s gotten itself a little jazzed up about rate cuts and when they’re going to happen,” Hogan said. “People need to focus on why they’re going to happen.”

A now hiring sign is posted in front of a U-Haul rental center on November 03, 2023 in San Rafael, California.
Justin Sullivan | Getty Images

When the December jobs report is released Friday morning, markets will be looking for a number that hits a sweet spot between not so robust as to trigger more interest rate hikes and not so slow as to raise worries about the economy.
In market jargon, that quest for the middle is sometimes referred to as a “Goldilocks” number — not too hot, not too cold — that can be difficult to find.

But in this case, the good news is that the range looks to be pretty wide with a higher probability of good news than bad.
While the Dow Jones estimate is for a nonfarm payrolls gain of 170,000, Art Hogan, chief market strategist at B. Riley Financial, said the acceptable range is really something like 100,000-250,000.
“I just feel like we have a much better receptivity to good news being good news now that we know that that’s not going to induce another rate hike,” Hogan said. “It’s just going to push off a rate cut.”

As things stand, markets figure the Federal Reserve is done hiking rates and could start cutting as early as March, eventually lopping off 1.5 percentage points from its benchmark rate by the end of 2024. Recent news coming out of the Fed is pushing back at least a little on that anticipated trajectory, and a strong jobs number could dampen the likelihood of policy easing that quickly.
“If we were to get above [250,000], then people might look at that and say we have to cancel March as a potential rate cut and maybe take one off the table for this year,” Hogan said. “Frankly, we know we’re at a place now where the Fed is done raising rates. So if that’s the case, clearly good news could be good news. It’s just how good the news could be before you get concerned that some of the hope for rate cuts might get pushed out into the back half of the year.”

High hopes for cuts

Markets have gotten off to a rocky start in the new year as rate-sensitive Big Tech stocks have lagged. Traders are anticipating that the Fed will ease up on monetary policy, though such an aggressive schedule of cuts could imply something more than winning the battle against inflation and instead may infer economic weakness that forces the central bank’s hand.
Hogan said investors should be taking that into consideration when thinking about the impact of lower rates.
“This is a market that’s gotten itself a little jazzed up about rate cuts and when they’re going to happen,” he said. “People need to focus on why they’re going to happen.”
“If the wheels are coming off the economic cart and the Fed has to rush in to stimulate that, that’s bad rate cuts, right?” he added. “The good rate cuts are if the path of inflation continues toward the Fed’s target. That’s a good rate cut. So if that doesn’t happen until the second half, I’m fine with that.”
As usual, markets will be looking at more than the headline payrolls number for the health of the labor market.

Digging through details

Wages have been a concern as an inflation component. The expectation for average hourly earnings is a 12-month growth rate of 3.9%. If that proves accurate, it will be the first time wage gains come in under 4% since mid-2021.
The unemployment rate is expected to tick up to 3.8%, which will still keep it below 4% for 23 straight months.
“The overall picture is one in which the labor market is gradually decelerating in a very orderly fashion,” said Julia Pollak, chief economist at online jobs marketplace ZipRecruiter. “I expect December to continue the trend of just gradual cooling to around 150,000 [new jobs], and possibly a small uptick in unemployment because so many people have been pouring into the workforce.”
The labor force grew by about 3.3 million in 2023 through November, though the trend has had little impact on the unemployment rate, which was up just 0.1 percentage point from the same month in 2022.
However, Pollak noted that the hiring rate is still below where it was prior to the Covid pandemic. The quits rate, a Labor Department measure that is looked at as a sign of worker confidence in finding new employment, has tumbled to 2.2% after peaking at 3% during the so-called Great Resignation in 2021 and 2022.
The jobs picture overall has shifted since then, with the once-hot tech sector now lagging in terms of job openings and health care taking the lead, according to Nick Bunker, economic research director at the Indeed Hiring Lab.
“We’re seeing a labor market that is not as tight and as hot as what we saw the last couple years,” Bunker said. “But it’s got into a groove that seems more sustainable.” More