SGM-FX insights

US Economy   The picture may look a bit fuzzy with US initial jobless claims for the week until July 24 being expected to be 380,000 but coming in at 400,000, but overall the direction of travel is clear: the US Economy grew 6.4% in Q1 and 6.5% in Q2 annualised. Not too shabby even […]

Baby steps   The Federal Reserve Bank offered its latest monetary policy decision yesterday. The announcement from the central bank fell broadly in line with the market’s expectations with Chairman Powell noticing progress in the international economy, but not quite the kind of domestic ‘substantial further progress’ required in order to justify fiddling with the […]

US Dollar   In late May the Dollar Index stood at the year’s low of 90.00 having been up to 93.19 in late April. Now back to 92.80 the US Dollar has benefitted and especially so versus the AUD and the CNY. Net long US Dollar positions are at their highest levels since May 2020 […]

Stagflation and the USA   In the 1970’s for anyone who can remember, the USA experienced the economic environment called stagflation notable for high unemployment, high inflation and low economic growth. As inflation rises investors sell bonds resulting in lower prices and higher yields which in turn prompts those investors to sell equities as well. […]

Political Risk Trade   With the unrest succeeded by the wave of rioting in South Africa, markets are looking at ZAR but also other emerging market currencies that are vulnerable to similar political risk. As a strategy it involves buying CHF or USD or EUR against emerging market currencies in anticipation of those emerging markets […]

China   The world’s second largest economy has bounced back from the pandemic supported by pent up export demand and policy support, however there is a suggestion in recent data releases that momentum has slowed. The expectation is growing therefore that the PBOC may cut the all important prime lending rate which will give an […]

Italian Government Bonds   Traditionally, Italian Government Bonds BTP’s have been volatile and often de-linked in their movements with the benchmark German Government Bonds. Interestingly this has changed markedly for 3 reasons in the past months: first the ECB bond buying programme, second the European post pandemic EUR800 billion fund of which EUR200 billion is […]

Chinese Yuan   The People’s Bank of China yesterday pledged to keep the Yuan stable and will make adjustments to its policy tools to help China’s struggling exporters. For example the amount of cash reserves that banks need to hold could be reduced which will feed through to and assist small firms that have been […]

EU2   There have been significant developments in the monetary and therefore currency outlook in both the Eurozone and the United States. Unfolding and gathering pace during the US and Asian trading sessions, the price output has been limited with major crosses largely unchanged from their median price yesterday. It has been reported that policy […]

German investor sentiment   The ZEW economic research institute reported that June investor economic sentiment fell from 79.8 to 63.3 despite Reuters having forecast it to only drop to 75.2. If this sounds to be an imprecise science, it is. Germans, it appears, at least according to these polls have quite sharp mood swings. Never […]

US Employment   With 9 million jobs remaining unfilled and less than 10% of unemployed actually looking for work, the USA is only too aware of why Covid plus the various Covid support schemes are not successful in getting Americans back to work. Despite nearly 60% of the adult working population and 46% of the […]

Oil   With WTI oil up almost USD1 and now at USD 74.98 prices are likely to firm more in the second half of 2021 as demand increases with economies returning to pre-pandemic conditions and travel restarting. The other determinant is the OPEC Meeting yesterday which having deliberated on the supply volumes for H2, decided […]