US Dollar
Yesterday saw USD reach its highest level this year up 1.5% against a basket of major currencies. The currencies that suffered the most are from those countries that are the biggest energy importers such as the Indian Rupee and the Japanese Yen as well as the EUR and the Korean Won. We are somewhat cautious about the formulaic pat answer of the EUR losing 0.5% for every 10% increase in the Oil price and the EUR also loses 2.5% when Natural Gas prices double. This is because when markets react to parallel market price moves or more importantly react to news that imply large price moves, formulae and rules of thumb tend to get flung aside. Right now, USD is underpinned by the potential of another energy price shock. One other thing: an energy price shock, we have learnt this week, is one when the US Administration cannot credibly explain that an upward move is just a glitch.
EUR/USD 1.1518.
European Meat Prices
When you dine out or even dine in on your holidays this year in Europe, you may notice significant price rises in meat prices across the EU. Of course, there are wide variations with for example goat meat in Kosovo rising 15% while falling 4% in Switzerland. More mainstream than goatmeat in the world of meat, when one looks at the price of beef it has risen by more than 20% in the Netherlands, Croatia, and Latvia and more than 15% in Portugal, Ireland, Denmark, Malta, Greece, and Austria. The reason for these rises is down to the continuous decline in livestock numbers which in turn has led to tighter supply. This is especially affecting the beef supply because production cycles are long and therefore it takes years to rebuild herds.
EUR/JPY 183.35.