Tuesday, October 11, 2016

Why the pound's fall matters; Muslim youth expect more; Eight technologies to keep an eye on

1 Why the pound’s fall matters (Kamal Ahmed on BBC) There are three broad reasons for the sickly state of the pound, which fell again on Tuesday by a precipitate 0.9%. First, and fundamentally, it is a market judgment on the future growth potential of the UK economy relative to the future growth potential of competitor economies, and their currencies.

If it is judged that the value of UK assets will grow less quickly in the future - and most economists have downgraded growth next year following the Brexit vote - then investors will discount those assets, sell sterling and buy more favourable currencies such as the dollar.

Second, this downward trajectory is then emphasised by near-term market makers who "short" the currency, making a profit margin on the pound's decline. Everyone becomes a little more nervous and the market for sterling becomes a little more sickly.

Third, differential interest rate expectations drive currency moves. In Britain, the Bank of England has made it clear it expects to engage in more monetary loosening before the end of the year.

Does that mean investors are becoming wary of lending to a country with a weakening currency and a government which has signalled a possible fiscal loosening driven by more borrowing? Not yet, is the answer to that question. At the moment, investors are very willing to extend rock-bottom borrowing facilities to the government as the fundamentals of the economy are strong.

Why does the fall of the pound matter? On the upside, it matters for exporters which are boosted as their goods are far cheaper on foreign markets. It matters for multinational companies like pharmaceutical firms which earn much of their income in dollars. It matters for the tourism industry in the UK, as foreign visitors flock here for bargains and good value holidays.

On the downside, it matters for tourists travelling abroad who will find everything they buy much more expensive. It matters for the food and fuel UK imports as it becomes more expensive. It matters for inflation, as the rise in import costs feeds through to businesses and the High Street.

And remember, it does not need much of a rise in inflation to wipe out real income growth which at present is running at around 2%. And if real incomes start falling, that is when the fall in sterling becomes a truly political issue.

2 Muslim youth expect more (Abdul Basit in Khaleej Times) Governments are not doing enough to address the needs of Islamic youth, according to around 50 per cent of the delegates who attended the first session of the Global Islamic Economy Summit 2016 in Dubai.

When asked if they were optimistic that governments in the region were appropriately addressing the needs of their youth, 50 per cent of delegates said they were not, 42 per cent said they were, with eight per cent being undecided.

Addressing the issue of rapid population growth - the youth segment of the world's 1.7 billion Muslims are growing at twice the global average - panellist Ali Al Nuaimi, a senior nuclear professional, said that while some governments see this as a challenge, others see it as an opportunity.

He highlighted the appointment of a Minister of State for Youth Affairs in February as a concrete example of the UAE striving to give voice to the youth. Al Nuaimi said the future could not be about creating more public sector jobs. "That's not empowerment," he said. "We're focusing on creating an environment where youth can thrive and fulfil their potential."

He added that an increased focus on entrepreneurship could be the answer: "Less than three per cent of youth here are entrepreneurs. This is a country of 200 nationalities, people come here from all over the world to start their own businesses. Our youth should be leading this movement and not falling behind."

3 Eight technologies to keep an eye on (Jon Card in The Guardian) Here are eight key areas that all businesses should pay attention to. A. Artificial intelligence. The AI market is growing rapidly and forecast to be worth $36bn by 2025. Prof Michael Feindt, a former Cern scientist and now chief scientific officer at predictive applications company Blue Yonder, says machines can learn from past experience better than humans can and are very effective at making unbiased predictions.

B. Augmented reality. AR and its better known cousin virtual reality (VR) are coming to the fore and revenues from these industries are forecast to reach $120bn by 2020. But PwC innovation consultant Jeremy Dalton, says there are clear differences – VR is an “immersive experience” whereas AR provides the ability to place a virtual image into a real environment.

C. Blockchain. It is best known as the ledger that records all bitcoin transactions. But entrepreneurs have spotted there are many uses of blockchain or distributed ledger technology (DLT) and investment is pouring in. D. Drones. Dr Kevin Curran, senior member of the Institute of Electrical and Electronics Engineers, predicts supermarket deliveries, aerial photography, advertising at public events and security/surveillance will all make use of drones soon.

E. Internet of Things (IoT). Researchers at Gartner estimate there will be 6.4bn “things” connected to the internet by the end of 2016. Heidi O’Leary, principal consultant at Market Gravity, says she expects to see big growth in “smart home” technology such as smart thermostats, connecting lights and security systems, as well as wearables such as smart watches, fitness and payment devices.

F. Robots. Experts say the global robotics and automated devices market is now entering a smarter phase and will be worth a predicted $226bn by 2021. Graham Mackrell, managing director of Harmonic Drive UK, which has created parts for Nasa missions to Mars, says collaborative robots (cobots), which can “mimic and learn” tasks from humans, are set to revolutionise workplaces.

G. Virtual reality. Dr Wendy Powell, lecturer in VR at the University of Portsmouth, says the affordability of VR now makes it within reach of even the smallest of businesses. “It offers a huge range of opportunities for business, from product visualisation to virtual tours, training employees in safety-critical processes, even improving health and wellbeing of staff and customers,” she says.

H.3D printing. Prof Hari Mann of Ashridge Executive Education predicts the 3D printing market will revolutionise manufacturing as a whole, enabling the creation of affordable, bespoke products produced locally. The sector is estimated to be worth more than $30bn by 2022.

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