Daily Brief – Rotation out of the US

Rotation out of the US

Quite what that rotation may mean and by how much is exercising the markets and also doubtless the Chair of the Federal Reserve. For the yield on 10 year US Treasury Bonds to move from 3.99% to 4.50% in a week is extraordinary. At the same time, the US Dollar Index fell 4% in the past week and by 10% in the last 3 months. Jamie Dimon of JP Morgan anticipates a kerfuffle in the bond markets, but most captains of the financial industry are less temperate in their language as to what the outlook looks like as investors scratch their heads as to why POTUS thinks that his current course will be beneficial to the USA, when all the evidence points to the contrary.

EUR/USD 1.1355.

US Eggs and Coffee

The rising costs of the staples of the American breakfast may be what brings home to US consumers what a weakening USD means to daily life. Eggs are now $6.22 a dozen and coffee beans have shot up in price on the back of higher international coffee prices exacerbated by the new level of USD. Coffee shops are noticing that despite coffee being part of the American dream sales have fallen significantly already.

GBP/USD 1.3087.

iPhone

In case you are wondering 80% of iPhones are made in China. Those phones which until last week were relatively affordable with the top of the range Pro 16 Max model costing upwards of $1199 depending on memory capacity chosen now with the Trump tariff they are not. Apple would have to spend $30 billion to build the factory capacity to manufacture those phones in the USA. That will take time. Then on top, wages in the USA are significantly higher than in China and working hours are somewhat more strictly regulated. All that adds up to iPhones now being unaffordable in the USA and likely to remain so as long as the current tariff weather prevails. 

EUR/JPY 163.03.

Frankly

Here’s an antidote to all that talk of those pesky tariffs: Nicola Sturgeon’s tell all book Frankly is coming out and if you hurry you might be able to bag a ticket at one of the literary talks in Edinburgh which she is giving at a mere £150 for a ticket, which includes meeting the ex-First Minister. Alternatively, stick the £150 into the drinks kitty and savour the thought of it buying 37 pints of Tennents.

EUR/GBP 0.8683.

Bright Eyes

Who can forget the syrupy song from the 1978 movie Watership Down that did more for rabbits than any movie previously and at the same time epitomised those more innocent days. The song was delivered faultlessly by soloist Art Garfunkel who had irrevocably split from his song writing partner Paul Simon. The song went to Number One, the world was fixated by the animated rabbits and subsequently the song went on to become the best selling single of 1979. Rabbit.

Is it a kind of dream
Floating out on the tide
Following the river of death downstream?
Oh, is it a dream?

There’s a fog along the horizon
A strange glow in the sky
And nobody seems to know where you go
And what does it mean?
Oh, is it a dream?

Bright eyes
Burning like fire
Bright eyes
How can you close and fail?
How can the light that burned so brightly
Suddenly burn so pale?
Bright eyes

Is it a kind of shadow
Reaching into the night
Wandering over the hills unseen
Or is it a dream?

There’s a high wind in the trees
A cold sound in the air
And nobody ever knows when you go
And where do you start
Oh, into the dark

Bright eyes
Burning like fire

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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