Daily Brief – British Pound

British Pound

In days long passed, a Friday was a good day for under siege politicians to deal with unfavourable news about themselves. Markets began quietening down at lunchtime and by 5pm participants were easing into their weekends or in the pub without the benefit (or otherwise) of mobile phones, social media, and non-stop news coverage. Friday was such a day for UK PM Keir Starmer who, despite playing the overseas business trip alibi card, found that he faced questions in Paris far away from what he had hoped would be a command statesmanlike performance with President Macron on the post conflict management of the Gulf of Hormuz. Meanwhile, markets took the view that the PM would remain in place until the awfulness of his government’s showing at the UK local elections in 3 weeks becomes apparent. Sterling traded in a surprisingly tight range but as always, while a week can be a long time in politics, so can a weekend.

GBP/USD 1.3486.

London Metal Exchange

The LME Index comprises 6 metals with aluminium being the largest weighting together with Copper amounting to 75% of the Index. The Index is up 12% and Aluminium is up 15% since March 1. The Gulf area contributes almost 10% of the world’s aluminium and smelting facilities in a number of Gulf states have been damaged by bombing and that, together with the supply disruption caused by the blockade of the Strait of Hormuz is causing the market to worry about a longer war, a longer period of uncertainty and a longer supply dislocation. The LME Index is therefore worth watching.

EUR/GBP 0.8713.

US Credit Risk

In today’s world of risk, links between geographies and sectors tend to be close and fast moving. Looking at the 6 largest US banks’ results, it is clear that the 3 areas of growing risk where risk management dashboards are lighting up somewhere between amber and red are: Real Estate, Private Credit and Private Equity linked transactions. In recent years, the private credit market where large providers raise debt from institutions and then lend to companies without banks being involved has grown exponentially as have the more opaque transactions of layered debt that fund private equity deals. Wells Fargo is the most exposed bank to commercial real estate. JPMorgan Chase, Goldman Sachs, Citibank, and Bank of America have varying degrees of exposure to these 3 broad risks. However, Morgan Stanley while it has risk across all sectors as a systemically important bank, because of its wealth management weighted model, is the least risky of the Big Six.

EUR/USD 1.1751.

Self Assertion

Fresh in from Copdock, Suffolk where 92-year-old Farmer Tom keeps chickens and of course a cockerel: a new addition to the coop – as opposed to the co-op, in the form of a peacock appeared from nowhere last week and initially made nice with the chickens and the cockerel. That changed by the end of the week when the peacock terrorized the chickens and went beak to beak with the cockerel. Farmer Tom had no choice but to step in and separate the peacock from his terrified flock, before banishing the bird from his farm. If any reader has mislaid such a fine and masculine specimen, they can find him at Easton Park Farm near Woodbridge where he is residing and very likely preening himself before taking on the next set of chicken challenges in pastures new. 

EUR/JPY 186.76.

The Lumberjack Song

Devotees of Monty Python the cult 70’s TV ground-breaking comedy show flocked to New York’s City Centre this day in 1976 where they enjoyed Graham Chapman, John Clees, Terry Gilliam, Terry Jones, Michael Palin and Eric Idle performing the Lumberjack Song. If they had looked carefully, they might have spotted Beatle George Harrison who had anonymously joined the chorus having been invited to participate by his Monty Python pal Eric Idle. The next night’s performance saw singer Harry Nilsson of Without You fame try the same thing, but not anonymously and less successfully, as he fell off the stage and broke his arm. Awwww.

I always wanted to be a lumberjack
Leaping from tree to tree
As they float down the mighty rivers of British Columbia
The giant larch
The redwood
The mighty scot’s pine
With my best girl by my side
We’d sing, sing, sing

Oh, I’m a lumberjack, and I’m okay
I sleep all night and I work all day
He’s a lumberjack, and he’s okay
He sleeps all night and he works all day

I cut down trees, I eat my lunch
I go to the lavatory
On Wednesdays, I go shoppin’
And have buttered scones for tea

He cuts down trees, he eats his lunch
He goes to the lavatory
On Wednesdays, he goes shoppin’
And has buttered scones for tea

I’m a lumberjack, and I’m okay (he’s a lumberjack, and he’s okay)
I sleep all night and I work all day (he sleeps all night, and he works all day)

I cut down trees, I skip and jump
I like to press wild flowers
I put on women’s clothing
And hang around in bars

He cuts down trees, he skips and jumps
He likes to press wild flowers
He puts on women’s clothing
And hangs around, in bars

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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