Daily Brief – Australia

Australia

Falling inflation, sluggish economic growth, a strong currency, lower living standards and low productivity would normally easily add up to an interest rate cut by the central bank: not in Australia where it was widely expected that yesterday would indeed see a rate cut. That is because the Reserve Bank of Australia is worried by what’s happening outside Australia and foresees difficult times ahead as the US tariffs bite. While the domestic picture more than justifies a rate cut, the international outlook has nixed it. As will sound familiar to UK readers, a recent landslide election victory for its Centre Left government provides the confidence to take unpopular economic measures.

EUR/USD 1.1705.

Chinese Yuan

In comparison to the currencies of Thailand, Korea, and Taiwan, China has seen the Yuan while admittedly at its weakest level for nearly 5 years operate in a tight range versus USD so far this year between 7.15 and 7.35. The Baht, Won and NT Dollar have all depreciated by between 6% and 14%. China having faced 100% tariffs has settled with the USA on 55% to be applied to its exports but needs a competitive currency to offset that level of tariffs. China’s exporters are now realising that they will not achieve that relief through a weakening Yuan yet although the expectation is for the PBOC or People’s Bank of China to allow the Yuan to weaken later in the year. A crumb of comfort then for China, should it need it, in that the USA while pushing the tariff deadline out by 3 weeks is evincing no signs of softening its stance on Asia.

USD/JPY 146.80.

Museums

Top of the tree for attendance is the Louvre in Paris with 8.7m visitors every year. Of the top four all are in Europe: second is the Vatican with 6.8m followed by two London landmarks: the British Museum and the Natural History that both have 6.4 million. This says plenty both for the enduring popularity of museums for both domestic and international tourists but also somewhat supports the Asian view which is that Europe is the museum of the world while glittering Asia is the industrial and technological future.

GBP/USD 1.3563.

Transportation Arbitrage

Post the recent Iran-Israel hostilities, we now know that oil carrying ships take 10 days from the Persian Gulf via the Suez Canal to Turkey, and thence the cargoes are transported overland to Western Europe. If those ships are re-routed around Africa it takes 24 days. Now Iraq is planning a corridor consisting of road and port facilities that will allow trucks to transport oil from Kuwait to Turkey in a week. A few issues of security involving rival factions within Iraq and the lucrative highway will require indefatigable not to mention fearless drivers – lots of them. Step forward the gold standard of long distance truck transport: Polish lorry drivers who apparently are up for it.

GBP/EUR 1.1585.

Smile

Lily Allen had a hit with this number this day in 2006 which went to Number One. A far cry from her actor dad Keith Allen who 8 years earlier had scored a hit with the Fat Les Band when they released that football anthem Vindaloo to coincide with the FIFA World Cup. Neither were subtle but Smile is more than a bit needy whiney and not to mention, moany.

When you first left me
I was wanting more
But you were fucking that girl next door
What’cha do that for? (What’cha do that for?)

When you first left me
I didn’t know what to say
I’ve never been on my own that way
Just sat by myself all day

I was so lost back then
But with a little help from my friends
I found the light in the tunnel at the end

Now you’re calling me up on the phone
So you can have a little whine and a moan

And it’s only because you are feeling alone

At first when I see you cry
Yeah It makes me smile
Yeah it makes me smile

Discussion and Analysis by Humphrey Percy, Chairman and Founder

Click Here to Subscribe to the SGM-FX Newsletter