Morning Brief – ECB

Humphrey Percy
Chairman and Founder
Fri 7 Jun 2024


As was widely expected, the European Central Bank duly cut its deposit rate by 25bps from 4.00 to 3.75% yesterday lunchtime. Despite inflation being forecast to remain above the key target rate of 2.0% well into 2025 and currently standing at 2.2%, the ECB went ahead with the President, Mme Lagarde strictly pronouncing at the subsequent press conference that further cuts could not be promised for the moment. The market took that to mean that there would be no further reduction in July or for the foreseeable future and the EUR duly strengthened sharply.

EUR/USD 1.0875.

Yen/Peso Carry Trade

In case you end up sitting next to a FX bore at a dinner this week, here is a quick cheat sheet in case they start banging on about the Yen carry trade. Almost all traders are at present effectively borrowing Japanese Yen at virtually no cost and investing in high yielding currency MXP for example. It works very well against most higher yielding currencies, but the MXP is especially popular as it currently yields 11%. Both Mexico and India have seen their interest rates rise on the back of election uncertainty. However this week that election uncertainty in Mexico has seen the MXP fall 4.4% and that means that when the carry trades are unwound it will cost traders a good proportion of their profit. So at the risk of giving that FX bore indigestion, having established that they are still in the trade, ask them where their pain level lies. There you are, that should be enough to shut them up until well after the pudding if not until going home time!

USD/MXP 17.52.

Best restaurant in the world

No longer Central in Lima, Peru but now Barcelona’s Disfrutar has lifted the crown for best restaurant. The set menu costs EUR 290 and the wine pairing EUR 160. If that sounds a lot, it is positively reasonable when measured against the top Copenhagen restaurants which cost a lot more. Also the cachet of best restaurant in the world and the not small matter (literallly) of the fact that Disfrutar offers 30 courses as its set menu.

GBP/EUR 1.11740.

French ATC

Next week the two key French unions that control air traffic control workers are due to strike. That means that all flights to or through Paris, Orly will be affected. For those flying over France it is still unclear whether “overflights” will also be affected, but worth watching this one and making sure that a good stock of reading material is to hand for any kind of European travel that involves flying. The better weather is surely a coincidence for this strike. Meanwhile keep the Kindle fully charged.

EUR/JPY 169.68.

Thank God I’m a Country Boy

This day in 1975 John Denver, Californian singer songwriter and early Green adopter secured his third number one with this hit; woo indeed:

Well life on the farm is kinda laid back
Ain’t much an old country boy like me can’t hack
It’s early to rise, early in the sack
I thank God I’m a country boy

Well a simple kinda life never did me no harm
A raisin’ me a family and workin’ on the farm
My days are all filled with an easy country charm
Thank God I’m a country boy

Well I got me a fine wife I got me an ol’ fiddle
When the sun’s comin’ up I got cakes on the griddle
And life ain’t nothin’ but a funny funny riddle
Thank God I’m a country boy

When the work’s all done and the sun’s settlin’ low
I pull out my fiddle and I rosin up the bow
The kids are asleep so I keep it kinda low
Thank God I’m a country boy

I’d play Sally Goodin all day if I could
But the Lord and my wife wouldn’t take it very good
So I fiddle when I can and I work when I should
Thank God I’m a country boy

Well I got me a fine wife I got me an ol’ fiddle
When the sun’s comin’ up I got cakes on the griddle
Life ain’t nothin’ but a funny funny riddle
Thank God I’m a country boy, woo

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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