Daily Brief – US Inflation

USD 30 million

With US inflation at 4.2% in May from 1 year earlier, the room for manoeuvre for incoming Federal Reserve Chair Kevin Warsh is looking problematic. Gasoline is up 50%, airline fares 27%, clothing 5%, and electricity 6% from a year ago. The challenge of satisfying POTUS who is expecting interest rate cuts and reducing the Federal Reserve balance sheet while addressing not only the highest inflation growth rate in the US for 3 years, but the near certainty of inflation breaching the 5% level in the next months means that not only are interest rate cuts off the menu, but at least one interest rate rise this year is now a necessity. With Kevin Warsh not a fan of forward guidance, markets are going to have to get accustomed to greater uncertainty than under Chair Powell.

EUR/USD 1.1576.

Samhung

No not a typo, this is North Korea’s taxi app equivalent to Uber and that is not the only surprise for those (few) travellers who make it to Pyongyang. The North Korean economy bolstered by arms sales and it’s supply of soldiers to Russia has benefitted by billions of Dollars, and China has provided financing to allow North Korea to import goods that could only be imagined just a few years ago. The prosperity encompassing massive new housing construction, consumer brands, domestically produced mobile phones and fast-food restaurants admittedly is concentrated in and immediately around Pyongyang. Almost half the 26 million population is malnourished, and human rights abuses are off the scale, but economically North Korea has come a long way with GDP growth of 3.7% in 2024.

GBP/USD 1.3420.

Oil

Since March 1, the US has burnt through 66 million barrels of its strategic oil reserve and is currently depleting it by 9 million barrels per week. Those puzzling as to why the oil price has not rocketed up to $150 or even $200 per barrel are for the moment placated by the threefold explanation of the world tapping into the US strategic reserve, increasing US production, and reducing consumption due to the higher prices. With the Strategic Reserve approaching its lowest level for more than 40 years when President Reagan was in the White House, the pressure to restore the tanker traffic through the Strait of Hormuz is building some would say unsustainably.
Short term moves in the oil price are not really on what the market is focused; rather a solution to the resumption of that tanker traffic as a start and the growing realization that oil prices are not at all likely to revert to pre-March 1 levels as the USA and the rest of the world realize that a robust energy defence strategy is not a nice to have but a sine qua non going forward.

Brent Oil USD 90.38.

Flavanols

Don’t forget the 5 a day mantra of fruit and vegetables but as with everything there are some much better choices when it comes to deciding on which 5. Flavanols are the way forward for cardiovascular disease, we learn, and the Top 10 in order are as follows: Plums, Cranberries, Blackberries, Green Tea, Broad/Fava beans, Cherries, Apples, Strawberries, Blueberries, and Pinto Beans. 

EUR/GBP 0.8627.

Foo Fighters

This day in 2015, Dave Grohl of FF fell off the stage and broke his leg in 2 places while the band was playing Gothenburg, Sweden. In true rock n’roll tradition he was stretchered off to receive medical attention only to return to play the rest of the concert while someone propped him up by holding his leg. Epic.

Hello
I’ve waited here for you
Everlong

Tonight, I throw myself into
And out of the red
Out of her head, she sang

Come down and waste away with me
Down with me
Slow, how you wanted it to be
I’m over my head
Out of her head, she sang

And I wonder
When I sing along with you

If everything could ever be this real forever
If anything could ever be this good again
The only thing I’ll ever ask of you
You’ve got to promise not to stop when I say when
She sang

Breathe out
So I can breathe you in
Hold you in
And now
I know you’ve always been
Out of your head
Out of my head, I sang

And I wonder
When I sing along with you

If everything could ever feel this real forever

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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