Morning Brief – European Central Bank

European Central Bank

The language has changed and the ECB set a whole lot of new records yesterday: firstly the language has gone from it will all be ok on the night to, these are the facts and we need to be pragmatic. Growth is stagnating and inflation is only moderating. If there is a Central Bank competition for talking tough Mme Lagarde must be a contender. Now the records: highest rates for 22 years, 8th successive increase, the steepest set of interest rate rises in the 25 year history of the ECB and inflation to remain above 2% target for another 2+ years. Inflation stands at 6.1% so no surprises that the ECB has left the door open for more rate rises despite the faltering EU economy.
EUR/USD 1.0870

Canada: Goodness Gracious Me

As many know, Canada is one of the most popular places to study for overseas students because it is pretty easy to get a work permit after graduating. In 2022 in Canada there were 800,000 students on visas and 320,000 were from India. It now turns out that many of those visas for Indian students were forged. So Canada advised that those on forged visas were to be asked to return to India. Understandably the students were reluctant but so were their advocates. Canada has a population of 39.5 million and plans on issuing 500,000 residency visas this year. Given Canada’s need for immigrant additions to the workforce due to its size and economic ambitions, the decision has now been taken to halt the repatriation of students on forged papers. The message is clear: all welcome, genuine visas optional.
USD/CAD 1.3325.

Bank of England

Next week the MPC meets to decide on UK interest rates. Difficult to see how they can do anything other than raise rates given what the Fed and the ECB has done this week and it is expected that a further increase of 25bps will be the upshot. Such is the place that Central Banks find themselves that we can probably expect a doveish increase rather than a hawkish increase. This will if correct suggest a pause in August. The BoE has form when it comes to wait and see, and that is in large part why they are in the inflation muddle that they are now: low productivity, wage inflation, flaccid economy, stubborn core inflation but…there is a need to raise rates. Hence the strength of GBP.
GBP/USD 1.2690.

Black Sabbath

So many records broken and of course released by the Brummie bad boys of Black Sabbath but surely the one they set with the release of their number one chart topping album 13 is unlikely to be broken: on this day in 2013 it was exactly 42 years and 8 months since the last time Black Sabbath had a Number One album back in 1970. It was of course their album which had natch to be played at maximum volume, Paranoid:

Finished with my woman ’cause
She couldn’t help me with my mind
People think I’m insane because
I am frowning all the time

All day long I think of things
But nothing seems to satisfy
Think I’ll lose my mind
If I don’t find something to pacify

Can you help me
Occupy my brain?
Oh yeah

I need someone to show me
The things in life that I can’t find
I can’t see the things that make
True happiness, I must be blind

Make a joke and I will sigh
And you will laugh and I will cry
Happiness I cannot feel
And love to me is so unreal

And so as you hear these words
Telling you now of my state
I tell you to enjoy life
I wish I could but it’s too late

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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