As we entered 2021 the consensus trade was: weaker USD on the back of President Biden’s trillion dollars of stimulus leading to easy money and a rise in the stock market. Well the last part has been right but at the end of the first quarter, it is clear that the relationship between a weaker USD and stronger Equity markets has broken down. The reason for this is the success of the USA’s vaccine rollout and the opposite of that in the EU. That means that as long as the economies of the EU and the USA diverge, it would be wrong to assume a weaker USD. There is now a second plank in the argument towards leading to a stronger USD scenario: the US economy will prompt the Federal Reserve to react which they will do promptly by tightening, and the consequent higher interest rates in the USA will lead to a stronger USD. For consensus traders, EUR/USD at below 1.18 is testing their pain levels so that may prompt if not a rush certainly a brisk move towards the exit of that particular trade.
This time it’s tensions between Chinese fishermen and the Philippines instead of Taiwan and their airspace: more than 220 Chinese fishing boats are fishing off the Whitsun Reef west of the Philippines’ Palawan Island. While nearly 7000 miles from the UK it is also by no means close to the nearest city in China, Guangzhou -in fact 1000 miles distant. The situation is being monitored but meantime the Philippines have scrambled their air force and are patrolling the area. Tensions in the area have prompted the Philippines to strengthen their Air Force and while it has 15,000 personnel and 211 aircraft, there has been a long period of cuts that has led to a need for modernization. Biggles aficionado, SGM-FX staffer, Euan Maskell explains that while they have 25 combat aircraft including 12 Korean KAI-T250’s, most of their deployment is in the shape of helicopters which given the huge size of the Philippines’ archipelago is a major challenge when it comes to providing an effective airborne deterrent. They do however have 3 batteries of Israeli Spyder surface to air missiles on order and due to be delivered in Q2 2021 which everyone hopes will be held in reserve-that is if they are not queued on a ship on the north side of the Suez Canal.
It was this day in 1975 that Led Zeppelin had all 6 of their albums in the Billboard Top 100. One of their best songs which is often described as the best rock group song ever was released in late 1971 and featured on the hugely influential Led Zeppelin IV album. Here is Stairway to Heaven:
There’s a lady who’s sure
All that glitters is gold
And she’s buying a stairway
To heaven
When she gets there she knows
If the stores are all closed
With a word she can get
What she came for
And she’s buying a stairway to heaven
There’s a sign on the wall
But she wants to be sure
‘Cause you know sometimes
Words have two meanings
In a tree by the brook
There’s a songbird who sings
Sometimes all of our thoughts
Are misgiven
Ooh, it makes me wonder
Ooh, it makes me wonder
There’s a feeling I get
When I look to the west
And my spirit is crying
For leaving
In my thoughts I have seen
Rings of smoke through the trees
And the voices of those
Who stand looking
Ooh, it makes me wonder
Ooh, it really makes me wonder
Discussion and Analysis by Humphrey Percy, Chairman and Founder
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