Daily Brief – US Interest Rates

Humphrey Percy
Chairman and Founder
Wed 3 Jul 2024

US Interest Rates

Federal Reserve Chairman Jerome Powell has not so much hidden behind the data at the economic summit in Sintra, Portugal yesterday but rather deployed it as a weapon against those baying for rate cuts: with inflation still half a percentage point above the target level on the Personal Consumption Expenditure index which is the Fed’s preferred monitoring tool for inflation, he can justifiably say that the data does not yet support cuts which he followed up yesterday with a comment that the US economy was strong in fact strong enough not to force him and his Fed colleagues into rushing towards rate cuts. That will ensure a continuing strong USD.

EUR/USD 1.0728.

Electric Vehicles

20% of all new vehicles sold globally are electric with 25% in Europe and 50% in China. As we have written, EV sales have been stagnating and stocks have been piling up in ports. Tesla bullishly blamed successively the Red Sea disruption which prevented deliveries of parts and also high borrowing costs. Not much narrative about the fact that EVs are mostly expensive-except for lower priced Chinese tariff free imported vehicles obviously. Now that the EU has piled on import tariffs of up to 38% on those cheap cars, the obvious answer was there all the time: reduce the costs of non Chinese EVs. Hey presto: Tesla has done it and the effect on its sales figures are self-evident: 444,000 vehicles sold in Q2 up 14% on Q1.

GBP/EUR 1.1802

UK Election

With the people of the UK due to exercise their democratic rights in just 24 hours, there are a number of conspiracy stories emerging about how all of the parties are avoiding topics that are simply too hard and too likely to damage the parties’ appeal to voters. The key area is that of the funding position of the UK-huge and getting bigger and how to tackle it-changing fiscal rules, clamping down on tax avoidance and inevitably raising taxes. While incoming new Labour PM Sir Keir Starmer has identified 3 taxes that he has pledged not to raise that still leaves plenty more taxes to raise plus the old political adage of changing his mind on those 3 taxes.

GBP/USD 1.2675

Rare Earth

As most people suspect or maybe even know, 70% of rare earth deposit extraction is in China and 90% of all processing of rare earth ore takes place in China. Last year there was a big discovery in Sweden but now its European neighbour, Norway has found what is being declared as the largest European deposit of rare earth.

GBP/NOK 13.55.

Don’t You Want Me

This day in 1982 English synth-pop band Human League formed in Sheffield in 1977 stormed to the top of the charts where they stuck for 3 weeks with this number. Still around but only one original band member remains-lead singer, co-founder and song writer Phil Oakley aged 68.

You were working as a waitress in a cocktail bar
When I met you
I picked you out, I shook up and turned you around
Turned you into someone new

Now five years later on, you’ve got the world at your feet
Success has been so easy for you
But don’t forget, it’s me who put you where you are now
And I can put you back down too

Don’t, don’t you want me?
You know I can’t believe it when I hear that you won’t see me
Don’t, don’t you want me?
You know I don’t believe you when you say that you don’t need me
It’s much too late to find
You think you’ve changed your mind
You’d better change it back, or we will both be sorry

Don’t you want me, baby?
Don’t you want me, oh?

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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