Daily Brief – US Payrolls

US Payrolls

Consensus is a wonderful feeling for market analysts and the consensus among them leading up to Friday afternoon’s release was that there would be 60,000 new jobs in the US economy announced for February. As it turned out there was a certain safety in numbers in that those analysts were all wrong when it turned out that jobs had fallen by 92,000. That meant that the USD gave up some of its gains and inevitably as night follows day expectations for a rate cut sooner rose on the back of what looks like a sure sign of a slowing economy. The counterbalance to that scenario is that with Brent Oil up again and this morning having now surged through USD100 to USD 107.56, there will be inflationary pressures flowing through at a much faster rate.

EUR/USD 1.1554.

Jet Fuel Hedging

Before the outbreak of war in the Gulf, and we need to remind ourselves that it is only just over a week, European jet fuel cost USD830 a ton. That has increased to USD 1500, the highest since the 2022 invasion of Ukraine. Airlines such as British Airways, Virgin Atlantic, EasyJet, and Ryanair do routinely hedge their fuel costs and maintain hedges of between 50 and 80% of their exposures. However, the protection afforded by that hedging only lasts so long and so even those airlines that do hedge will be looking to raise fares or even cancel flights soon given the 80% hike in jet fuel which accounts for approximately 40% of their total cost base. Then there are the mainly US carriers that have a policy not to hedge…

GBP/USD 1.3319.

British Pound

The suspicion that Sterling is not a safe haven currency was confirmed firstly by PM Starmer and his cabinet colleagues’ performances in the past week, and secondly by the markets that rapidly drew the conclusion that the UK economy is like those of the EU vulnerable to a near 30% hike in the oil price except more so. Belatedly and deservedly, Energy Minister and Ecowarrior Ed Miliband is in the spotlight over his uncommercial and misjudged North Sea oil licenses stance. Sterling duly sold off.

EUR/GBP 0.8675.

Middle East Tourism

Two headline numbers: the Middle East could see a drop of 30 million in tourist numbers and secondly, this will cause a hit of USD 40 billion in revenues whether direct or indirect. While nowhere near the number of tourists who visit Spain annually which is almost 100 million, the impact will be acute for the Gulf countries that are still in the foothills of tourism and especially so in the case of Saudi Arabia which bills itself as the “most exciting and upcoming destination.”  Too exciting.

EUR/JPY 183.20.

Should I Stay or Should I Go?

Can it really be 35 years ago to the day that the Clash had their Number One Hit with this song which was ensured immortality when it was adopted as the Levi’s TV advertisement? Yes, is the answer.

Darlin’ you got to let me know
Should I stay or should I go?
If you say that you are mine
I’ll be here ’til the end of time
So you got to let me know
Should I stay or should I go?

It’s always tease tease tease
You’re happy when I’m on my knees
One day is fine and next is black
So if you want me off your back
Well come on and let me know
Should I stay or should I go?

Should I stay or should I go now?

Discussion and Analysis by Humphrey Percy, Chairman and Founder

Click Here to Subscribe to the SGM-FX Newsletter