Daily Brief – Eurozone

Eurozone

Yesterday EU inflation came in at 2.6% for the year to end July up from 2.5% to end June. Hardly enough to frighten the horses but the market is all too aware of ECB President Lagarde’s comments regarding inflation in the last few months. On that basis the conclusion is that EU interest rate reductions are coming but not as soon as hoped. Consequently the EUR is at its highest this year. Apart from interest rates, the putative and hopefully imminent Middle East peace deal will reduce the price of oil and that is a further positive for EUR.

EUR/USD 1.1115.

London City Airport

Good news for the owners of LCY who are mainly institutional and without being unduly xenophobic, not British. Deputy PM Angela Rayner in a bid to demonstrate that the new UK Labour Government is business friendly has approved a huge increase in passenger numbers from 6.5 million annually to 9 million. This may seem relatively small versus LHR that handled 79 million passengers in 2023 but for LCY and the surrounding residential London Boroughs such an increase promises traffic jams and further overcrowding on the already overloaded Dockland Light Railway. Even London Borough of Newham where LCY is located which might one assume be supportive has objected but to no avail: Angela Rayner has gone ahead.

GBP/USD 1.3033.

Graduate Career Advice

Billionaire Google co-founder Larry Page has been less than helpful when he advised graduates of the University of Michigan USA in their graduation ceremony to identify “avenues of laziness” and then leverage them to make money and allow them to do less work. Worth $156 billion Larry Page is 51 years old and neglected to advise the starry eyed graduates that the chances of them enjoying anything like the same success as himself were negligible. Employers expecting the new cadre of graduates in September should be warned that they may be less than keen on rolling up their sleeves.

USD/JPY 145.65.

China

So far this year USD 15 billion in investment has been taken out of China as investors have concluded that the risk reward ratio simply does not add up. There is one exception and that is Germany which has invested an additional USD 4.8 billion in Q2 2024 which brings the German 2024 total to USD 7.3 billion despite the cratering Chinese property market and fears for growth in the economy. While Germany is doubtless basing its strategy on the Chinese government guarantees supporting the investments, there is a flaw in this should China be unable/ choose not to honour their obligations. In that case the European Central Bank will have to step in and support Germany. Also in the case of China invading Taiwan and the EU imposing sanctions on China, those investments will become at risk. It will also make it extremely difficult for Germany to be impartial when it comes to EU action given the immense conflict of interest that Germany is currently running. Something to talk about at Jackson Hole later this week no doubt.

EUR/GBP 0.8529.

The Last Stones Show Ever To Be Held in Britain

This was how the Knebworth Festival was advertised when it kicked off this day in 1976 headed by The Rolling Stones as well as 10cc, Leonard Skynrd and Todd Rundgren. The organisers laughed all the way to the bank and the Rolling Stones have been laughing ever since.

Time is on my side, yes it is
Time is on my side, yes it is

Now you always say
That you want to be free
But you’ll come running back (I said you would baby)
You’ll come running back (I said so many times before)
You’ll come running back to me

Oh, time is on my side, yes it is
Time is on my side, yes it is

You’re searching for good times
But just wait and see
You’ll come running back (I won’t have to worry no more)
You’ll come running back (spend the rest of my life with you, baby)
You’ll come running back to me

Go ahead, go ahead and light up the town
And baby, do everything your heart desires
Remember, I’ll always be around
And I know, I know like I told you so many times before
You’re gonna come back, baby
‘Cause I know
You’re gonna come back knocking
Yeah, knocking right on my door
Yes, yes!

Well, time is on my side, yes it is

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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