SGM-FX insights

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 […]

UK Job Market  In the quarter to end February in the UK 220,000 more people were looking for jobs than in the previous 3 months even as the number of vacancies fell from 1,250,000 to 1,100,000. This means that the economic uncertainty is making people seek income. So even before PM Sunak called for UK’s […]

May Meetings Between now and the first two weeks of May, there will still be a number of good opportunities for price adjustment. However, given the data calendar and current market positioning, it seems most likely that such volatility would be driven by investors’ expectations surrounding the set of central bank decisions in early May. […]