Daily Brief – EU-USA Trade Deal

EU-USA Trade Deal

As we recently wrote, when EU Commission President Ursula Von Der Leyen emerged from her 1-2-1 meeting with President Trump at Turnberry Golf Course last summer, it was all clear: the EU would remove tariffs on US goods and grant preferential access to the EU for all US land and sea produce; in turn, the US would impose 15% tariffs on EU goods. 10 months on and POTUS has lost patience threatening 25% tariffs on EU cars among other retributory measures. The EU has twice suspended the work on the wording of the EU-US Trade Agreement which POTUS has (correctly) interpreted as the EU dragging its feet which is understandable given his threats or overtures over Greenland. The EU now has a hard date symbolically of July 4 when the EU’s failure to comply will be met with 25% US tariffs. The EU scribes have suddenly managed to finalise the drafting giving credence to the well-known POTUS views on the exertion of power and the long-awaited Trade Agreement is expected to be signed next week.

EUR/USD 1.1614.

UK Unemployment

The adjective appended to most reports on the 3 months to March, UK unemployment figures is “surprise.” Clearly the authors of these reports are some distance away from the coalface of the employment market and the increasing bite of the labour market measures foisted on employers in the past 2 years. The obligations towards new and untested school leavers and graduates discourages employers from taking a punt on joiners and has slashed tens of thousands of vacancies particularly in the 16–24-year-old category with the result that vacancies now stand at a 5 year low of 705,000. So, unemployment at 5% is not a surprise and neither is the slowing wage inflation also reported this month.

GBP/USD 1.3395.

US Treasury holdings

Dollar supremacy and the currency’s global acceptance as the pre-eminent reserve currency may be of less interest to the present US Administration, but it may just be coming home to them that the Dollar’s status confers privileges and advantageous financing rates to the USA as well as certain obligations that have been nurtured over many decades by the Federal Reserve. Foreign holdings of US Treasury Bonds are declining, and the overall number has declined from USD 9.49 Trillion in February to USD 9.25 Trillion in March. That may sound like a fraction, but it is both symptomatic of a wider shift and a fraction of a very large number. China has seen its holding reduce to USD 652.3 Billion the lowest since 2008. The UK on the other hand has bucked the overall trend by increasing its holding by USD 29.6 Billion. While the Iran-US war and the much higher energy prices may be obvious causes for this reduction in foreign holdings of US Treasuries, markets are taking the view that this shift represents a broader disillusion with the USA and its international policies.

EUR/JPY 184.75.

We are Sailing

Despite hantavirus giving rise to increased media attention there have not been widespread cancellations, collapsing cruise stocks, declines in occupancy, or itinerary suspensions in the cruise market. Seabourne which is at the upmarket end of the cruising spectrum has the following on offer for the summer months that all fall into the category of reassuringly expensive rather than cut price fire sale offerings per person: 7 day Greek Islands GBP 3,229; 14 day British Isles GBP 5,184; 22 day Reykjavik to New York GBP 6,884. As such, one can conclude that the cruising market takes a sanguine view of the recent media attempt to big up hantavirus. The media has moved on and is now more sensibly refocused on the outbreak of Ebola in Uganda and the Democratic Republic of Congo.

GBP/EUR 1.1535.

Umbrella

This day in 2007, Barbados born chanteuse Rihanna in collaboration with rapper JayZ began a 10 week run at the top of the UK charts and almost as long at the top of the US Billboard 100. Breathless fans marvelled that it was the longest running Chart Topper since 1994 when Wet Wet Wet scored big with Love is All Around.

Uh huh, uh huh (yeah, Rihanna)
Uh huh, uh huh (Good Girl Gone Bad)
Uh huh, uh huh (take three, action)
Uh huh, uh huh (Hov)

No clouds in my stones
Let it rain, I hydroplane in the bank
Comin’ down like Dow Jones
When the clouds come, we gone
We Roc-A-Fella
We fly higher than weather
In G5’s or better
You know me (you know me)
In anticipation for precipitation stack chips for the rainy day
Jay, Rain Man is back
With Little Ms. Sunshine, Rihanna, where you at?

You have my heart
And we’ll never be worlds apart
Maybe in magazines
But you’ll still be my star
Baby, ’cause in the dark
You can’t see shiny cars
And that’s when you need me there
With you I’ll always share
Because

When the sun shines, we’ll shine together
Told you I’ll be here forever
Said I’ll always be your friend
Took an oath, I’ma stick it out to the end

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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