Daily Brief – Central Bank Meetings

Central Bank Meetings

In normal times Central Bank policy committees study their dashboards of indicators such as Inflation, Interest Rates, Employment, Economic Growth, Commodity Prices and a broad set of Confidence measures. So this week when the world’s Central Bankers meet, they will be confronted by both the immediate-a set of flashing red indicators on their dashboards, but also the sure knowledge that much bigger economic effects will be experienced over the coming months as the continuing conflict comes towards the end of its third week. That is what distinguishes pro-active policy makers from too slow and reactive ones which unfortunately has included the Bank of England in its treatment of the last inflation spike four years ago. All in all, another especially key week for markets with the Federal Reserve tonight and the Bank of England, Bank of Japan, and the ECB tomorrow.

EUR/GBP 0.8643.

Straits of Hormuz

Last week we drew attention to the critical dependence on the Straits and as the current Iranian blockade and the hostilities with the USA continues into the middle of the third week, it is timely to look at which countries have dependence on the Straits of Hormuz for delivery of their energy needs: Japan with 72% and South Korea with 65% head the table, while both China and India are up there with 50% each, and of course much greater in terms of both of their market sizes. Underlining the lack of urgency from POTUS to work towards the cessation of the war is that the USA is dependent for only 2% of its energy needs on the Straits of Hormuz. As a reminder, pipelines and road transportation can handle a volume of 5 million barrels of oil per day versus the 20 million barrels of oil per day normally transported by sea through the Straits. Whether the USA and the US Treasury Secretary, the robotic Scott Bessent in particular “is fine” with a few Iranian, Indian, and Chinese ships passing through the Straits, it is therefore rather less than fine for the rest of the world which depends on the waterway being open and safe.

GBP/USD 1.3346.

European Corporate Winners and Losers

Since the outbreak of the Iran war, Euro stock indices have fallen by about 7% but within that, there have been some much larger movements with Energy such as Equinor up 24%, Renewables such as Verbio up 22% and Fertilisers, including Yara International up 15%. On the other side of the coin, the losers are Steel, Airlines, and Construction. Before you dismiss Wizzair down 31% as being of only passing interest ahead of Air France and Easyjet down 22%, ThyssenKrupp is down 28% and ArcelorMittal almost 20% as is mining company Hochschild also down 20%.

EUR/USD 1.1532.

Gin Genies

No not the similar sounding David Bowie song but rather this is the tale of two perennially ex pat Brits who have established a 2000+ bottle Gin Library in their hotel. So, if gin is your thing and in particular unusual gin from almost every corner of the world including Uganda, Botswana, and Bulgaria, proceed without delay to the Solar Branco Eco Estate Hotel. One thing before you grasp the tonic and get ready to go, their hotel is in the Azores on the island of Sao Miguel.

EUR/JPY 183.30.

This Time I Know It’s For Real

This day in 1989 the songwriting trio Stock, Aitken and Waterman had this Donna Summer number in the Top 10 as well as not one but two others: Jason Donovan with too Many Broken Hears and Bananarama’s Help. SAW may sound like a law firm but in the music world are considered to be one of the most successful songwriting partnerships ever with over 100 Chart Hits.

What would I have to do
To get you to notice me too?
Do I stand in line? (Line)
One of a million admiring eyes

Walk a tightrope, way up high
Write your name across the sky

I’m going crazy just to let you know
You’d be amazed how much I love you so, baby
When I get my hands on you, I won’t let go
This time, I know it’s for real

Should I write or call your home? (Home)
Shout it out with a megaphone? (Phone)
Radio, TV news (news)
Got to find a way to get the message to you

To say I love you with a neon sign (sign)
Anything to make you mine

Discussion and Analysis by Humphrey Percy, Chairman and Founder

Click Here to Subscribe to the SGM-FX Newsletter