With the 0.50% increase in rates yesterday it would seem to some people that the BoE was steering a prudent and middle course- especially the Monetary Policy Committee who were the ones who took that decision.
The problem is that these are not normal times and the BoE having assured markets that UK inflation would peak at 7% before falling gently back to 2-3% a few months ago, is now saying the same except that the new peak is 13% on inflation. Plus, for good measure, the BoE is now predicting a year long recession. Judging by the market reaction to the announcement yesterday, it is not buying it nor the soothing reassurances.
Inflation fears outweigh a hard landing ie recessionary fears. Nor is the leading candidate for PM Liz Truss helping the case for UK plc and also GBP because her vague statement made yesterday seems to be suggesting that the BoE has been insufficiently pro active and therefore should be less independent going forward.
Markets did not like that either and GBP dropped like a stone before steadying somewhat nervously later in the day.
GBP/USD 1.2150.
NYMEX WTI at $88.50 is at a low since February this year. Why? Markets are spooked at the likelihood of hard times ahead and fear that both the US economy and the wider global economy are going to see lower economic activity in 2023 than currently envisaged.
News breaking that a copper warehouse storage facility in Hebel, North China has less copper in fact than the inventory reflects. These things happen but it has to be said not to the extent of 200,000 tonnes that is or rather was being financed and which has gone missing. Copper is currently priced at USD 7,750 per tonne which means that USD 1.55 billion will have to be written off by the financing banks. Maybe a relatively small amount in the overall scheme of things, but hardly helpful in times of commodity shortages and questions on the financial probity of China’s financial marketplace.
High temperatures not just denominated in Celsius yesterday in London’s South Kensington. Shy and retiring students at Imperial College became worked up by an Anthony Gormley sculpture because the figure’s legs could be interpreted as being phallic. Crikey. We took a look at the stacked cantilevered steel blocks designed to resemble a squatting human figure and were left well, neither shaken nor stirred. GBP/EUR similarly unmoved at 1.1875.
Pink Floyd fans will recall their debut album Piper at The Gates of Dawn released this day in 1967. It did not do that well commercially initially at least and took a mere 27 years to go Gold in 1994. Here is one of the better singles from the album:
Arnold Layne
Arnold Layne had a strange hobby
Collecting clothes moonshine washing line
They suit him fine
On the wall hung a tall mirror
Distorted view, see through baby blue
He dug it
Oh, Arnold Layne
It’s not the same, takes two to know
Two to know, two to know, two to know
Why can’t you see?
Arnold Layne, Arnold Layne
Arnold Layne, Arnold Layne
Now he’s caught
A nasty sort of person
They gave him time
Doors bang, chain gang he hates it
Oh, Arnold Layne
It’s not the same, takes two to know
Two to know, two to know, two to know
Why can’t you see?
Have a Great Weekend!
Discussion and Analysis by Humphrey Percy, Chairman and Founder
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