SGM-FX insights

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 […]

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 […]

Did EURUSD miss the news?  Over the weekend, the President and the Speaker of the House of Representatives reached a much-awaited deal on the US debt ceiling. The impending constraint on debt could have forced the shutdown of government departments and precluded the US government from servicing costs and existing debts, triggering a default. The […]

UK Wages Bank of England Governor Andrew Bailey yesterday warned of the pressure on wages that are threatening to lead to a wage price spiral as the effects of inflation on the cost of living together with the 12 consecutive interest rate rises that consumers have experienced. The market has not enjoyed the poor inflation […]

De Dollarization Much being written about the demise of the USD, and for the sake of getting it out there in case you missed it, Iraq has just banned the use of USD to buy houses and cars which are normally the largest ticket items for the consumer. Mainly Iraqis have until now used USD […]

US Consumer Credit Back in 2000 US consumer credit stood at USD 1.6 Trillion. Clearly near zero interest rates for the past 10+ years plus easy credit conditions have lulled US consumers into a sense of borrow now repay tomorrow. Except that the repay tomorrow part seems to be getting lost with US consumer credit […]

What happens if the US defaults?  Whilst much of the financial world is focussed upon the potential for US default, it is hard to analyse the outcome of such an unprecedented event. The answer is that until it happens, we simply don’t know exactly what the outcome would be. However, there are many likely knee-jerk […]

IMF and Bank of England Readers will recall the poor report card that the International Monetary Fund gave the UK in March. The latest set of forecasts from the Bank of England set it at odds with the IMF: firstly no recession, instead modest +0.25% growth this year and +0.75% in the next two years. […]

US Debt Ceiling Crisis  As we have written in the past weeks, the USA may be unable to pay its bills under the current debt ceiling limit as soon as June 1st ie just over 2 weeks away. Apart from the safe havens of Swiss Francs (CHF) and Gold, there is another area of the […]