Daily Brief – EUR

EUR

Expanding on what we wrote yesterday, there has been quite a move in EUR/USD in the past week. The rise in EUR interest rates 2 weeks ago was enough to confirm the ECB’s adherence to its inflation fighting mandate and temporarily strengthen EUR. Then last week the rhetoric from the newly minted Federal Reserve Chair Warsh eclipsed that with his own determination to crush US inflation. That, plus the strength of the US economy and the perceived weakness of that of the Eurozone’s economy plus the likely tail effect of the past 4 months and the energy shock was sufficient to weaken EUR/USD. At the current exchange rate level, that much derided set that are chartists have popped back up again and having wielded their rulers and sharpened their pencils, have concluded that EUR/USD is poised just above a crucial support level which if broken would see EUR/USD return to near parity. Given that the market was only a few weeks ago confident in EUR/USD strengthening from 1.16 to 1.20, that is what the excitement is about.

EUR/USD 1.1381.

GSM-R

This is the danger of reliance on a common system standard when it fails and that is what happened in Germany in the middle of this week. GSM-R or Global System for Mobile Communication-Railway is the voice and data system to operate railways and allows drivers and data centres to communicate. GSM-R has been rolled out across the entire railway network in Germany and so when it failed in the middle of this week, all trains in Germany were halted by Deutsche Bahn for 3 hours. More pertinently that same system has been introduced as the common standard since 2000 for railways across the EU according to the European Union Agency for Railways. It is unclear what caused the “technical problem” that seized up GSM-R as Deutsche Bahn are not releasing that information, but the suspicion given that this is a first for such an issue, is that DB was the subject of a hack.

GBP/EUR 1.1608.

Digital EUR

We have written before on this subject but the news this week is that the introduction of the Digital EUR is on track for 2029. The ECB is determined to drive the project forward as they do not want the EU to be so slavishly dependent on US payment systems – as much as 61% of all payments within the EU area flow through the Visa and Mastercard systems and almost all EU payments to outside the EU. Some doubt the take up of Digital EUR given that while the individual holding limit has not been set, it is likely to be in the region of EUR 2000 initially and that is too low to be of practical use for many people. The reason for a low limit is that the ECB, Central Banks, and all Commercial Banks are concerned that depositors will move savings from existing bank accounts to the Digital EUR which will undermine liquidity, denude the banking system of deposits, and restrict commercial banks’ ability to make loans. There is an argument that suggests that the ECB’s determination to solve one problem i.e. reducing the dependency on US payment systems is in danger of causing a much larger one.

EUR/JPY 184.05.

Calendario Romano

The Roman Catholic calendar on sale mainly in outlets nearby to the Vatican City, Rome at a cost of EUR 8 features 12 black and white photographs of good-looking priests in clerical attire. To boost its sales ( it only sells a couple of thousand) the publishers planted a news story that it featured “hot looking priests” and then gave the story a further spin by suggesting that the “priests” were not actually priests and therefore an embarrassment to the Vatican. To set the record straight, the Calendario Romano does feature men dressed as priests, but the publication with photographs by Piero Pazzi has nothing to do with the Vatican so no embarrassment there. Enigmatically smiling Giovanni Galizia who is not a priest and has never been one, has featured on the cover of most of the past 23 (yes 23) editions is now 39 but has hung up his cassock and can now be found plying his trade while presumably still smiling enigmatically in the skies… as a flight attendant on a Spanish airline. Bless.

GBP/USD 1.3215.

Dreams

This day in 1993 Hackney, London, Brit singer Gabrielle struck big with her debut single Dreams. Unpromisingly named Louisa Bobb to Dominican parents she had a difficult adolescence being suicidal which took her in the direction of studying law. However, law’s loss was music’s gain and Gabrielle as she became known went on to a 30 year plus singing career. If you want to see her this year, Gabrielle is to support Rick Astley on his Reflection tour.

They can come true, yeah
They can come true
Do you hear what I’m saying?
Dreams can come true
Ohhhh
Dont you know that dreams
Dreams can come true?

Dreams can come true
Look at me babe, I’m with you
You know you gotta have hope
You know you gotta be strong
Dreams can come true
Look at me babe, I’m with you
You know you gotta have hope
You know you gotta be strong

Move a step closer
You know that I want you
I can tell by your eyes
That you want me too
Just a question of time
I knew we’d be together
And that you’d be mine
I want you here forever

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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