Daily Brief – US Dollar

US Dollar

As markets mostly do after a near straight line decline of 14% up until the end of June USD has clawed back 2% since July 1. For the next couple of months it would look as if USD will consolidate further. What could spoil that? 1. Unexpected US protectionism in the shape of extra self harming tariffs over and above those already signalled 2. POTUS firing long suffering Fed Chair Powell. Another unexpected bolster for USD after a net capital outflow from the USA of USD 14 billion in April was a net inflow of USD311 billion in May. The announcement of the demise of USD is premature.

EUR/USD 1.1626.

EU

So what happens if the EU does not manage to head off POTUS’ 30% tariffs? The answer is that the EU will impose tariffs on the USA. The result of all this is that it will affect EUR 72 billion of EU business primarily in aircraft, machinery, chemicals and plastics and pharmaceuticals . The 3 EU countries most affected are Germany, Ireland and the Netherlands and account for EUR 65 billion.

EUR/GBP 0.8668.

Soggy Sterling

A stronger USD combined with less than positive economic data add up to GBP having less of a sunny July. The positive effects of Chancellor Reeves’ much vaunted growth strategy is still awaited and in particular the labour market is contracting with fewer jobs. As we have written before it should come as no surprise to markets given that the employment law changes and in particular the rise in Employers’ Insurance is making companies in the SME sector understandably cautious before committing capital and adding to the workforce. Vacancies are being withdrawn.

GBP/USD 1.3416.

Italian demographics

Italian women are now giving birth to an all time low of 1.18 babies. The Italian population has been falling for the past consecutive 16 years and has dropped a whopping 1.9 million in the past decade. Allowances and tax breaks are either insufficient or lacking and the simple truth that while Italian women claim that they want to be paid by the government to reverse the trend, they just don’t want to have so many babies. Like Japan Italy has to face the fact it has an ageing declining population.

EUR/JPY 173.01.

Pretty Vacant

This day in 1973 the Sex Pistols were invited to appear on the BBC’s Top of The Pops. The lads managed to sneer as they lip synched through this number. That was all before they were banned by the BBC for their version of God Save the Queen which of course turbo charged both their fame and their careers.

There’s no point in asking, you’ll get no reply
Oh just remember I don’t decide
I got no reason it’s all too much
You’ll always find us
Out to lunch

Oh we’re so pretty
Oh so pretty
We’re vacant
Oh we’re so pretty
Oh so pretty
A vacant

Don’t ask us to attend, ’cause we’re not all there
Oh don’t pretend ’cause I don’t care
I don’t believe illusions ’cause too much is real
So stop your cheap comment, ’cause we know what we feel

Oh we’re so pretty
Oh so pretty
We’re vacant
Oh we’re so pretty
Oh so pretty
Vacant
Oh we’re so pretty
Oh so pretty
Ah but now
And we don’t care

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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