Daily Brief – US Dollar

US Dollar

Markets not liking POTUS pontificating on the Federal Reserve’s interest rate policy on Wednesday, and less still on his view about the competence or otherwise of Chairman Powell. Given the past few weeks, the betting is that Powell’s time is over either being replaced or having a Trump nominee second guessing him but whatever the case, the independence of the Federal Reserve looks to be compromised. US Dollar weakened by more than 1%. Gold $3354 and Brent $67.73.

EUR/USD 1.1727.

British Pound

With Sterling enjoying its place in the sun in good part due to the Dollar’s weakness, the question is where next from its current 3 year high. The FX market’s answer if not unequivocal is higher with an objective of GBP/USD 1.40. That rather assumes political stability due to the still thumping Labour Government majority won in July 2024 which appears at first sight looks to have plenty more time. That part of the script for Sterling strength may not run to plan due to the no small matter of the Prime Minister facing a revolt from his own MPs which is more than reminiscent of the Conservative opposition’s playbook. Now Sir Keir has been renamed Never Here due to his new roving unpaid international role as presidential picker upper and fringe member of the EU, the last two weeks have seen a government crisis unfolding entirely of its own making without its leader to get his many MPs back into line over the benefits revolt.

GBP/USD 1.3742.

BRICS and E6

With the world fixated on POTUS, it is as well to remember that there is a lot more going on elsewhere economically and trade wise. On 6-7 July the 17^th annual BRICS or Brazil, Russia, India, China and South Africa will take place in Rio de Janeiro, Brazil. Since 2010 when South Africa joined, Egypt, Ethiopia, Iran, Indonesia and the UAE have become full members with Belarus, Bolivia, Kazakhstan, Cuba, Malaysia, Nigeria, Thailand, Uganda and Uzbekistan invited as partner countries. Even though President Xi will not attend next week’s meeting instead sending a deputy in his place and some countries may be unable to attend, this bloc is an economic, trading and natural resources behemoth.

E6 is a similar overlapping group designated as the largest and most influential emerging economies comprising China, India, Brazil, Russia, Indonesia and Mexico. Larger and less unwieldy, this group are forging ahead on industrialisation, technological advancement and expanding consumer markets which distinguishes them from the wider BRICS club.

EUR/JPY 168.91.

Pucker Up

Thank goodness for the larger and less unwieldy in the middle of this week’s geopolitical turmoil and market volatility: the Guardian focuses on the issues uppermost in its readers’ minds – obviously; which is why just yesterday there was a debate on whether it was or was not OK to kiss one’s partner immediately after kissing one’s cat. The answer was that it mostly was OK subject to rubbing noses rather than full on kissing according to the kisser, but it was not OK from the kissee’s point of view. It was not reported what the cat thought.

GBP/EUR 1.1720.

I Wanna Dance with Somebody

This day in 1987 Whitney Houston released her eponymous album, Whitney which featured not one, two or three Number Ones but four and this one was and remains a cracker. Not bad for a first timer. For those of us who saw her in concert at the end of her career, it was to watch the tragic decline of a fine artiste who had descended into a haze of pharmaceuticals.

Ah-ha
Yeah
I wanna dance

Clock strikes upon the hour
And the sun begins to fade
Still enough time to figure out
How to chase my blues away

I’ve done alright up ’till now
It’s the light of day that shows me how
And when the night falls, loneliness calls

Oh, I wanna dance with somebody
I wanna feel the heat with somebody
Yeah, I wanna dance with somebody
With somebody who loves me
Oh, I wanna dance with somebody
I wanna feel the heat with somebody
Yeah, I wanna dance with somebody
With somebody who loves me

I’ve been in love and lost my senses
Spinning through the town
Sooner or later, the fever ends
And I wind up feeling down

I need a man who’ll take the chance
On a love that burns hot enough to last
So when the night falls
My lonely heart calls

Oh, I wanna dance with somebody

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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