Daily Brief – Independent Central Banks

Independent Central Banks

The concept that has served the USA and the wider world so well for more than 8 decades is being tested in respect of the Federal Reserve by POTUS and the financial world is largely so far, complacent. Distinguished economist Paul Krugman wrote an excellent piece yesterday and his conclusion, other than posing the question as to why markets were not “freaking out”, was that markets have always been notoriously poor at reading the runes when it comes to spotting the bleeding obvious retrospectively. PK cited a number of examples including the sub prime crisis that began in 2005 and took 2 years to explode into the Global Financial Crisis of 2007. As we suggested earlier in the week, time, reflection, and analysis at the weekend may very well lead to an end to that complacency, and the start of a period of volatility as markets experience what Paul Krugman describes as the giddy rush of cartoon character Roadrunner as he runs off a cliff before inevitably, gravity kicks in.

EUR/USD 1.1689.

Indian Summer for Sterling

As GBP prepares for the last business day of August, it is worth taking a look for the outlook for GBP over the next 4-8 weeks. In short, the mood music from the Bank of England, the less than positive political outlook in the short term for France and therefore the EUR, and lastly the likely reaction from global markets on the POTUS interventions in the running of the Federal Reserve when it is analysed further all add up to a positive outlook for Sterling. Of course, that could change with the UK inflation picture looking questionable with higher energy prices in the Autumn and wobbles in the run up to Chancellor Reeves’ Autumn Statement, but overall an Indian Summer for Sterling is the most likely currency weather forecast.

GBP/USD 1.3520.

Moldova

In case it has passed you by, Moldova is due to hold elections on September 28. The contest is a two horse race between the pro Russian Communist Party and the pro European Socialist Party. This week the triumvirate of the PM from Poland, the Chancellor from Germany, and the President from France have all been in Chisinău, Moldova to offer their support plus a plethora of promises: fast track EU membership, EUR 2 billion of investment, and strong promises of prosperity, and peace going forward. The real agenda is to ensure that Moldova does not go Communist, and allow the creeping Russian progress towards the West, and the hype neatly overlooks the facts that, on economic criteria, Moldova comes up woefully short, and as a cost benefit exercise for the EU, Moldova does not in any way pass muster.

EUR/JPY 171.66.

La Tomatina

If throwing tomatoes to the max is your thing you have missed it for this year since the annual festival at Bunol, near Valencia Spain has splatted to a messy conclusion yesterday. Never mind, ink it in your diary for next year and get ready not to wear your best clothes as it gets more than messy and features both ripe tomatoes and lots of tomato pulp.

EUR/GBP 0.8645.

Never Gonna Give You Up

Debut single, 5 weeks at the top of the UK charts and the pre-cursor of the Rick Roll this number became the best selling single of 1987 and launched Rick Astley as the epitome of not only Essex but Thames Estuary chic. Phew.

We’re no strangers to love, you know the rules and so do I
A full commitment’s what I’m thinking of
You wouldn’t get this from any other guy.
I just wanna tell you how I’m feeling, gotta make you understand.

Never gonna give you up, never gonna let you down
Never gonna run around and desert you
Never gonna make you cry, never gonna say goodbye
Never gonna tell a lie and hurt you.

We’ve known each other for so long
Your heart’s been aching, but you’re too shy to say it

Inside we both know what’s been going on
We know the game and we’re gonna play it.
And if you ask me how I’m feeling, don’t tell me you’re too blind to see.

Never gonna give you up, never gonna let you down

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

Click Here to Subscribe to the SGM-FX Newsletter