SGM-FX insights

Clockwork  In the weeks ahead expect to see continued focus upon the impending US debt ceiling. The phenomenon is something that rears its head periodically as the US government kicks the can down the narrow road of an increasingly unsustainable fiscal policy constraint. The provision of a legislative limit on the amount of debt that […]

European Central Bank  Yesterday the ECB duly raised its interest rates by 25bps. President Lagarde maintained that the ECB was on a journey and had not yet arrived-some would, given that ECB inflation is not dropping and is stuck at 6.9%, interpret that analogy as being their firm intention to continue to raise rates given […]

5-5.25% Yesterday’s Federal Reserve interest rate decision saw the Fed deliver their 10th consecutive rate hike. The May decision only saw rates raised at the central bank level by 25 basis points. Psychologically, this pushes US benchmark rates above the significant 5% level. As we wrote yesterday, raising the cost of debt servicing also adds […]

US Government Default on June 1 without a hike in the Debt Ceiling  Markets (so far) are remarkably sanguine about this appalling scenario for the US and therefore the global economy. President Biden and the Republican House Speaker have not discussed this issue since February-and the Speaker is currently in Jerusalem so unable to meet […]

Setting the tone Following the bank holiday here in the UK, the market will hit the ground running today. The start of May marks a critical time for markets with numerous heavy weight central banks due to publish rate decisions and some critical data scheduled for release. The overnight session saw focus turn to the […]

US Q1 Growth  Expected to come in at plus 2%, US GDP yesterday afternoon only managed an anaemic increase of 1.1% which has given the gloom merchants further ammo as they point to this together with low house sales as evidence that the higher interest rate regime has stalled the US economy which will make […]

Time to double down? A rate hike at the ECB next week looks like a foregone conclusion. The only question remaining is whether the bank decides to opt for a 25 or 50 basis point adjustment to its key monetary policy facilities. There is likely to be increased Euro volatility moving into the event. However, […]

US Consumer Confidence  A surprise fall in consumer confidence meant that confidence in April was the lowest since July 2022 and reflected growing fears that the steep interest rate rises would tip the US economy into recession. Against that the expectation for 12 months average inflation in the US is still 6.2%. Hence the wobble […]

Winter is coming Here in the UK, we have seen the IMF consistently downgrade growth expectations. Whilst the IMF has been pessimistic specifically on UK growth, routinely placing the UK at the bottom of the pack, global growth forecasts have also been downgraded as interest rates have risen. Still, the condemnation of UK growth looks […]

UK Interest Rates  Previously expected to peak at 4.5%, UK interest rates are now (mostly) expected to peak at 5% in the summer. Worth examining what the Bank of England forecast the annual inflation rate to be in February 2022 for 1 year forward in February 2023: 5.2%. As we know it is almost 5% […]

UK Inflation  At 10.1% March UK inflation is not only higher than the other developed markets, it is not coming down much which suggests that the Bank of England has misjudged the amount of interest rate medicine that is required and also the speed that it needs to be administered. The expectation was that inflation […]

Not quite 10 Data was expected to be particularly important to GBP this week. On Tuesday, the market observed the latest UK wage data which showed unexpectedly high growth figures within household earnings. This has set the stage for concerns surrounding a miss in inflation too, with wage price inflation often having a significant influence […]