Traditionally, Italian Government Bonds BTP’s have been volatile and often de-linked in their movements with the benchmark German Government Bonds. Interestingly this has changed markedly for 3 reasons in the past months: first the ECB bond buying programme, second the European post pandemic EUR800 billion fund of which EUR200 billion is going to Italy in grants and loans and last the appointment of Mario Draghi with all his ECB credentials as Prime Minister. All of this has made the vocal and anti European and Euro lobby in Italy much quieter. Before declaring victory, Italy is mindful that its debt to GDP ratio of 180% needs work, but markets have been cheered and the Italy premium to Germany is down to 100 basis points. Last but not least the correlation of Italy to Germany which had slumped to 0.4 prior to this year is back to 0.8.
EUR/USD 1.1815.
Yesterday’s rise of 0.9% in June on top of the May 0.5% increase in CPI reflects a stronger recovery than was certainly expected by the market that had pencilled in 0.5% for June. The inoculation programme plus low interest rates plus the $6 trillion pandemic relief measures has sent prices sharply higher and strained the supply chain as consumer confidence has returned which in turn adds further fuel to the price rises. The rise of 5.4% in the year to June 30 is the strongest rise since 2008. The global semi conductor shortage has been responsible for price rises in cars and trucks which has been the main culprit for the CPI increase.
The International Energy Agency or IEA yesterday warned that markets need to brace themselves for higher oil prices and more volatility unless OPEC can agree that oil supplies can be increased as the economic recovery continues. With oil inventories low and OPEC+ remaining in disagreement, the seemingly extreme forecasts of oil reaching $100 do not now seem so outlandish. WTI at $73.83 for now.
It was this day in 1979 that the wonderful American singer Donna Summer known as the Queen of Disco had not one but two hits in the Charts with Bad Girls and Hot Stuff. Here is Hot Stuff which most had us throwing shapes of varying quality on club dance floors in 1979:
Sittin’ here eatin’ my heart out waitin’
Waitin’ for some lover to call
Dialed about a thousand numbers lately
Almost rang the phone off the wall
Lookin’ for some hot stuff, baby, this evenin’
I need some hot stuff, baby, tonight
I want some hot stuff, baby, this evenin’
Gotta have some hot stuff
Gotta have some love tonight
Hot stuff
Baby, baby
Baby, baby (tonight)
I need hot stuff
Baby, baby
Baby, baby (tonight)
I want some hot stuff
Baby, baby
Baby, baby (tonight)
I need hot stuff
Baby, baby
Baby, baby (tonight)
Discussion and Analysis by Humphrey Percy, Chairman and Founder
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – British Pound
Humphrey Percy
Wed 23 Apr 2025
British Pound A 7 month high versus USD, and GBP is at present benefitting from the self inflicted wounds that the USA is continuing to suffer, the latest of which is the speculation over whether POTUS will defenestrate the Chair of the Federal Reserve. At the moment, and we choose our words carefully given the […]
Daily Brief – UK Employment
Humphrey Percy
Wed 16 Apr 2025
UK Employment At 75.1%, employment for people aged 16-64 looks sort of OK depending on what that really means, but it does not alter the fact that there are currently 1.55 million people who are unemployed, or 4.4% of the potential workforce. Another much more significant number, is that there are currently 9.27 million people […]
Daily Brief – Rotation out of the US
Humphrey Percy
Mon 14 Apr 2025
Rotation out of the US Quite what that rotation may mean and by how much is exercising the markets and also doubtless the Chair of the Federal Reserve. For the yield on 10 year US Treasury Bonds to move from 3.99% to 4.50% in a week is extraordinary. At the same time, the US Dollar […]
