SGM-FX insights

Antipodean weakness  Many of the currencies that would have in years gone by been described as high beta, high yielding currencies, are now carving the way for monetary normalisation. The weakness seen in the Kiwi and Aussie Dollars since the start of the year is further emphasising the changing role of AUD and NZD within […]

UK Food Inflation Such is the state of affairs regarding UK inflation that the news that annual food inflation has fallen from 15.4% in May to 14.6% in June was greeted with enthusiasm. Food has taken up the baton from energy when it comes to eye watering levels of UK inflation and despite reassuring words […]

Sterling and the Bank of England On Wednesday the BoE Monetary Policy Committee will, having braced itself for the release of the latest cost of living figures, have to vote on a change in UK interest rates. Most observers believe that the split in the committee will be a sizeable majority for a rise of […]

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 […]

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 […]

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 […]