Daily Brief – UK Rates and Sterling

UK Rates and Sterling

Parsing the language of Central Bankers has been an art form since the beginning of well, Central Banks if not time which in this context began at the end of the 17^th century. One thing that all the largest Central Banks agree on is that inflation is a worry and remains so. However, in short order last week saw Brent Oil rocket up over USD 100 before falling back to USD 87 and then up to USD 92 before returning to its current USD 86. During those moves over just 5 trading sessions the language diverged significantly. The current understanding is that with UK June inflation at 2.6%, the Bank of England will leave interest rates unchanged tomorrow which in turn implies that inflation while remaining a worry is not sufficient to prompt a rise. As a result, while the market is reassured by inflation being under control, it has sent Sterling lower but not drastically so but to a new big figure with 2-year gilt yields reflecting all this at 4.36%.

GBP/USD 1.3280.

Federal Reserve

What could set the cat among the pigeons is the Fed raising interest rates this evening. It might be a case of nearly new Chair Warsh putting his own stamp on the Fed, or it could be that the Fed is rather more concerned about the cost of gasoline at the pumps and the effect that it is having on US inflation which stands at 3.5% at the end of June, but maybe not enough attention is being paid to the prediction betting market which suggests a 40% probability of a hike this evening which is giving a fillip to USD.

EUR/USD 1.1355.

Coal

It may seem bizarre for us to be writing about coal on one of the hottest days of the year, but when it comes to coal, not only is it a major air pollutant but its use demonstrates exactly where efforts should be directed to cleaning up the planet and tackling part of the reason for ever rising air temperatures. Two words: China and India which together consume 70% of all coal on Earth. Of the 166 ExaJoules or EJ consumed, China burns 92 and India 23. The nearest coal consuming country after that is the USA with 8. Save the money on the next COP summit and spend it on tackling that stat.

EUR/JPY 186.27.

Valhalla Viking Weekend

If the idea of a Viking fest floats your long boat and stirs your inner desire to participate in combat re-enactments, shield wall demonstrations, blacksmithing, leather working, glassblowing and weaving, you will have to wait a whole year until the last weekend of July 2027 when you should head down the M3 and turn off for Dummer Down Farm, a mere Nordic axe throw from Basingstoke. Other highlights include a Mead Hall complete with Viking Feast which promises Nordic Folk music and traditional food washed down with cider and mead. Later in your day before heading home or possibly to your tent (camping overnight is on offer) you can round things off with boat burning a ceremonial Viking longship while watching fire dancing. Dummer previously only on the map as the family home of Sarah Ferguson the erstwhile Duchess of York is now additionally known as the gateway to Valhalla. 

EUR/GBP 0.8554.

Light My Fire

Can it really be 59 years ago that frontman Jim Morrison and The Doors came up with this number? In a word: yes. It was this day in 1967 that The Doors began a run at the top of the Billboard 100 with this song which encapsulated the mix of sexual revolution and psychedelic drug experimentation that defined the time. Jim Morrison, no stranger to controversy, was enmeshed in all sorts of trouble over the word “higher” which the Establishment (correctly) took as encouragement to his audiences to take drugs. Just under 4 years later Jim Morrison departed this world having fully involved himself in both drugs and the sexual revolution at the much too young to go age of 27.

You know that it would be untrue
You know that I would be a liar
If I was to say to you
Girl, we couldn’t get much higher

Come on baby light my fire
Come on baby light my fire
Try to set the night on, fire

The time to hesitate is through
No time to wallow in the mire
Try now we can only lose
And our love become a funeral pyre

Come on baby light my fire
Come on baby light my fire
Try to set the night on, fire yeah

The time to hesitate is through
No time to wallow in the mire
Try now we can only lose
And our love become a funeral pyre

Come on baby light my fire
Come on baby light my fire
Try to set the night on, fire yeah

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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