SGM-FX insights

Chinese Tariffs When the EU decided to impose tariffs and restrictions on Chinese Electric Vehicles entering the EU this summer, there was little thought about the law of unintended consequences. That came home yesterday when China retaliated by requiring Brandy imports into China to be accompanied by security deposits of between 34 and 39%. Martell, […]

Nonstop flight to nowhere And before you start wondering, no, this brief isn’t about some new route Qantas has launched to propel passengers an inconceivably long distance in one hit. What I refer to in the title of this briefing are the rapidly evolving growth and economic base case projections within the US. The debate […]

EU One of the unspoken questions arising from Mario Draghi’s no punches report on the EU is: what is the EU for and where does it want to go? The further integration topic is not addressed let alone solved, since the mood music is against greater integration unless it is driven by the fear factor […]

Bank of England In an interview with the Guardian newspaper, Governor Bailey made it clear that Central Banks could afford to cut interest rates more sharply. Markets correctly interpreted that statement as him preparing the way for cuts at pretty much every Bank of England MPC meeting for the next 6 months until they reach […]

Not just risk off As the rally in the US Dollar continues to gain traction this week, it is increasingly hard to write it down to risk alone. As we highlighted yesterday, strong demand for safe-haven assets has largely been attributed by financial media to rising tensions in the Middle East. Looking at the spectrum […]

Fifty Up Exactly 50 years ago today I set out on my career in the City of London. Many of the men whom I worked with wore bowler hats and smoked pipes. Discount House men wore morning dress and top hats. Everyone wore two or three piece suits and black shoes. If you wore brown […]

Overrated Rates The unwinding of USD implied short term interest rates shouldn’t be underestimated. Take a brief look at changes in FX swap pricing over the past few months and you’ll see just how significant those interest rate expectations have proved to be. Particularly within GBPUSD, the difference is enormous. Post-pandemic inflationary pressures affected the […]

EU Rate Cut With EU core inflation now reported to be 1.7% led by both France with inflation of 1.5.% and Spain at 1.6%, expectations are now running high for an ECB rate cut of 0.25% on October 17. The EU inflation target is 2% so on that measure alone the market is right in […]

Berlin and Rome As we have written several times recently the German car industry is going through tough times as is the Italian car industry especially given the hard date of 2035 when the sales of diesel and petrol fuelled cars will no longer be permitted. Now their respective governments are indicating a softening of […]

Unwinding Aussie? In recent months the Australian and New Zealand Dollars have both been able to recover ground against a weakening US Dollar. Set backs to the progress made amongst the Antipodean currencies has largely been down to changes in global growth expectations. With the soft landing narrative still just about alive thanks to the […]

British Pound The news that Goldman Sachs is predicting a GBP/USD level of 1.40 in the next 12 months reflects the positive sentiment based on interest rate differentials as we wrote yesterday plus a re-rating of the USD which seems less certain given the current geo political turmoil-see below. However GBP is now enjoying its […]

A reason to rally GBPUSD yesterday surpassed recent highs. Of course, the main driver of this move has been the prospective of a positive yield differential in favour of GBP between the two currencies thanks to the outsized Fed cut and subsequent BoE hold. This move has been so significant that as of yesterday, within […]