SGM-FX insights

Hawkish Pause  Jargon used when discussing central bank decision making and communication normally involves the words ‘dovish’ or ‘hawkish’. Descriptions of a dovish decision or attitude refer to the central bank steering away from tighter monetary policy and higher rates on interest. By contrast, decisions and commentary described as hawkish refer to a central bank […]

UK Wage Growth Average earnings up 7.2% over the 12 months to April outstripped market expectations of 6.9%, but never mind that, it will cause furrowed brows at the Bank of England’s Monetary Policy Committee as they meet today. Unemployment at 3.8% is better than the 4% expected. What these two stats mean is that […]

Recession risk  Right about when the world woke up from the ‘inflation is transitory’ narrative and started adjusting rates, recessions were priced in across the globe. It was assumed that the central bank action to raise interest rates in the face of inflation would ultimately have a costly impact upon growth rates further down the […]

US Payroll and Fed Implications Numbers in the public and private sector jumped 339,000 rather than the 190,000 expected in the May release which came out on Friday afternoon. The Federal Reserve had managed rather cleverly to have lulled the market into accepting that there would be no need for a rate hike in June […]

OECD The cheerful folk at the OECD were at it again yesterday (Brit bashing) with the forecast that the UK will in fact have the worst inflation of any of the OECD nations at 6.9% this year. That means, conclude the market savants that interest rates will have to stay high for longer (no real […]

Canadian Curveball  Canada was one of the first movers globally to raise interest rates in the face of rising inflation. Whilst much of the rest of the world, including the US, the Eurozone and the UK were still sitting on their hands claiming inflation would be transitory, Canada was busy hiking rates. The nature of […]

Australia With a 25 bp increase in interest rates, the Reserve Bank of Australia took interest rates to an 11 year high of 4.1% and with that increase took the total increase since May 2022 to 4% which is the most aggressive rate tightening cycle ever. This was not expected and consequently had a disproportionate […]

US rate cuts  Much of the momentum for EURUSD trading above 1.10 only a few weeks ago was built upon expectations of rate cuts by year end at the Federal Reserve. Whilst constantly changing, that view is under threat currently, with markets pricing stickier rate expectations than they previously had been. The Fed is still […]

UK A couple of statistics over the weekend that caught the eye: the first is more marketing than substantive economically, but the second one is rather more significant. Taking the first one, Saffron Building Society is offering its savers who have been with them for more than 1 year the chance to open a monthly […]

UK House Prices Unsurprisingly given the 12 interest rate rises and cost of living squeeze in the UK, the housing market has seen its largest year on year fall since 2009 when everyone was suffering from the global financial crisis. In the year to April the UK housing market has dropped by 3.4% with the […]

Opportunity for a weaker Dollar  The passing of month-end allows markets an opportunity to reassess currency valuations. Despite a cooling off within the Dollar as forecasted following the agreement between the White House and Kevin McCarthy, month end flows yesterday showed favourable conditions for a short-term Dollar resurgence. The beginning of June coincided with headlines […]

Turkish Lira While President Erdogan removed the uncertainty overhanging the Turkish market by winning the election in the run off over the weekend, the news served to cement the certainty that nothing much was likely to change with respect to Turkish economic policy or indeed the subservient role of the Central Bank of Turkey to […]