Daily Brief – British Pound

British Pound

Ahead of Thursday’s by election, it is worth looking at Sterling and instead of predicting gloom and doom – initially at least – pose the question as to what would make Sterling appreciate at this time? Economic growth: not apparent given that the UK economy is contracting slightly following a drop in spending and the impact of higher fuel costs kicking in. Political stability and strong clear government leadership: neither in evidence. A weaker EUR which might flatter Sterling? Again, not apparent following the ECB interest rate hike last week. And talking of which, with impeccable timing the next MEPC meeting is of course on Thursday as voters in Makerfield cast their votes. It is not expected for there to be a change upwards in interest rates so no help there. The detail and actuality (or not) of the US-Iran peace talks might strengthen GBP, but is unlikely to do so for very long. As can be seen from the above it is hard to make the case for Sterling strengthening unless it is a case of it benefitting due to other major currency weakness.

GBP/USD 1.3406.

Sweden

Given the current chattering classes’ as well as the Fourth Estate’s agonizing on the referendum 10 years ago that led to Brexit, it is worth looking at Sweden. Last year, 32% of Swedes polled were in favour of abandoning the SEK and joining the EUR. That has now fallen to 28%. When it comes to joining the EU, the anti-feeling in Sweden is growing with 52% polled against it. While the UK is 6 times the size of Sweden’s there are reasons that the UK should take note of the favourable comparisons that Sweden has: foremost is its debt to GDP ratio at 35% versus the UK’s 101%. Sweden’s inflation rate of 1.5% is much better than the UK’s 4.2%, but when it comes to unemployment Sweden comes off much worse at 8.5% versus the 5% of the UK.

EUR/GBP 0.8628.

Central Banks

It is telling that if the world’s central banks were issued with report cards for how they were dealing with the latest bout of inflation besetting the world, 46 out of 68 would be on the naughty step for failing to remain within their own inflation targets. Those 46 are led by the USA with an inflation target of 2% versus the latest CPI of 4.2%. EU 3.2% versus 2% target and the UK 2.8% versus 2% target. Honourable exceptions are Japan and Switzerland but a cursory examination of the Top 30 economies lead one to the conclusion that interest rates have bottomed out and are on the rise.

EUR/USD 1.1568.

Sheep Worrying

When woke urban animal welfare nuts come across a sheepdog rounding up sheep in a rural setting, the urge to report an instance of sheep worrying to the RSPCA is overwhelming – apparently. This happened recently near Buckfastleigh, Devon when dairy and beef farmer Tom Trueman received a letter from the RSPCA detailing the alleged offence when his dog was rounding up some sheep that had broken away from the herd. Time to re-air those old sheepdog trial programs on the BBC. Here Shep etc!

EUR/JPY 185.36.

X & Y

For Brit band Coldplay led by Chris Martin aka Mr Gynneth Paltrow at that time, on this day in 2005 when decoupling was not yet a thing, X & Y turned out to be Number 1 slots for their album in both the UK and USA simultaneously. Some may complain that all their music sounds the same, but that is surely sour grapes when the band has a net worth well in excess of USD 500 million. Decouple from that!

When you try your best, but you don’t succeed
When you get what you want, but not what you need
When you feel so tired, but you can’t sleep
Stuck in reverse

And the tears come streaming down your face
When you lose something you can’t replace
When you love someone, but it goes to waste
Could it be worse?

Lights will guide you home
And ignite your bones
And I will try to fix you

And high up above or down below
When you’re too in love to let it go
But if you never try, you’ll never know
Just what you’re worth

Lights will guide you home
And ignite your bones
And I will try to fix you

Tears stream down your face
When you lose something you cannot replace
Tears stream down your face, and I

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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