Daily Brief – Stagflation USA

Stagflation USA

This is the spectre confronting Federal Reserve Chair Powell and the wider USA. It is unusual simultaneously to have both rising unemployment and higher prices with the consequence of rising inflation, but that is where the USA stands today, in the face of the TT or Trump tariffs. Unsurprisingly, despite POTUS offering his expertise on the US economy and the desirability of immediate interest rate cuts, the Federal Reserve left rates unchanged on Wednesday night. What happens next with US interest rates will depend on which worsens more: unemployment or inflation. Neither are appealing to the USA.

USD/JPY 144.46.

Bank of England

Not surprisingly, the Bank of England cut interest rates by 25bps to 4.25%. With inflation down to 2.6% from 2.8% in March some had expected a full 50bps, especially as the salami slicer has been deployed on growth prospects with 1% for 2025 and now 1.25% in 2026 down from 1.5%. Given that the UK’s population is growing by 1% a year, at best the UK is breaking even and is a far cry from the UK Government’s promises on growth. In an effort to divert interest away from today’s lacklustre economic picture, the market was alerted and consequently waited for the well telegraphed US-UK trade deal from press conferences in Washington and London, which will be carefully picked over in the next days. So far it has been greeted in a mixed way.

GBP/USD 1.3341.

US Real Estate

A real life recent real estate tale from Carmel, California known for its wonderful coastline, pretty town, nearby world class golf course and most famous resident and ex mayor, Clint Eastwood owner of the Hog’s Breath Inn. A number of houses admittedly fine houses were for sale at USD 16 million but not shifting due primarily to economic uncertainty and the cost of borrowing. One of the sellers asked his realtor what price his USD 16 million house would command if he wished to achieve a sale within a month. The answer was USD 5 million. The property was placed on the market at USD 5 million and 4 bidders emerged, following which a sale was agreed at USD 6 million. The other USD 16 million houses are now all on the market at USD 5 million. If there is a moral to this story it is that there is a perceived price and then there is the readily achievable price also called the liquidity price. If one is going to move from one to the other, it is best to be first.

EUR/USD 1.1313.

Talisker

It sounds like a joke but it’s not; on Sunday at 12:30 pm four Asian heisters in their thirties comprising 3 men and 1 woman stole bottles of whisky from the Talisker Distillery worth £1600 and Scotland’s finest are pursuing enquiries. So far, they are described as being slim, having dark hair and wearing dark glasses. Despite narrowing down the field of suspects with these descriptions, an arrest is not expected imminently. Good to see, however, that the police are on it as if such a crime was reported further south Talisker would be met with a weary sigh, a shrug and a suggestion to fill out a form.

GBP/EUR 1.1790.

Hero

Happy 50^th today to Enrique Iglesias, who has made a phenomenal career on the back of what he learnt from Dad Julio Iglesias and improved further on it to become a global force in the romantic ballad market and at the same time extremely wealthy with a fortune conservatively estimated to be in excess of USD 100 million. While I have not had the pleasure of listening to Enrique, I did attend a concert in 1975 at the Royal Albert Hall given by Julio Iglesias, where the predominantly female audience showed their appreciation by writing their names and phone numbers on their underwear and throwing them at the luckless Spanish artist.

Let me be your hero

Would you dance, if I asked you to dance?
Would you run, and never look back?
Would you cry, if you saw me cryin’?
And would you save my soul tonight?

Would you tremble, if I touched your lips?
Would you laugh?
Oh, please, tell me this

Now, would you die for the one you loved?
Hold me in your arms tonight

I can be your hero, baby
I can kiss away the pain
I will stand by you forever
You can take my very breath away

Would you swear that you’ll always be mine?
Or would you lie?
Would you run and hide?

Am I in too deep?
Have I lost my mind?
I don’t care, you’re here tonight

I can be your hero, baby

Have a Great Weekend! 

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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