#ThrowbackThursday:
Look around. The Federal Reserve has tightened policy considerably, the European Central Bank’s first anticipated interest rate hike in seven years is pencilled in for next year. Add to that the removal of the stimulus provided by numerous quantitative easing programs and it’s unsurprising that the waters are beginning to turn choppy. Put simply, the unfaltering and unwavering liquidity provisions that have been made available by public institutions have turned/are beginning to turn off the taps. With immense cash flows in the bond markets each day it is unsurprising therefore that the world’s major currencies are encountering uncharacteristic liquidity as public demand is being replaced by private purchase. Add to that canvas a Brexit, Italy’s populist government and prospective spending plan, German political instability, and Trump’s unique style of leadership, and intraday volatility less than 0.5% within GBPUSD, EURGBP and EURUSD seems like a miracle. Today, the UK cabinet was presented with the 95% completed plan for Brexit. Reflecting this risk and rumours surrounding this event, the Pound drifted lower throughout the day’s session. Given the progress on Brexit, markets are coming to expect an even more meaningful cabinet meeting next week and an impending European summit to discuss the results. The European Union this morning gave its impression of the Italian economy. The numeric impression was concerning with improving expectations for economic growth next year were overwhelmed by a budget deficit that was forecast to grow from 1.7% of GDP next year to 2.9% of GDP; a level well outside the EU’s two-decade long permissible levels. This was nothing markets didn’t know already with the EU having labelled Italy’s spending plan unacceptable for two weeks now. However, the reminder of European risk was sufficient to push the Euro back down to 1.14 against the Dollar and 0.70 within EURGBP.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – POTUS in Kingdom of Saudi Arabia
Humphrey Percy
Wed 14 May 2025
POTUS in Kingdom of Saudi Arabia As one of POTUS’ travelling companions on this week’s visit, Larry Fink of Blackrock represents everything that a US President might want to burnish his credentials in the desert kingdom: head of the largest asset manager on the planet, hugely influential and totally credible. Just a shame that he […]
Daily Brief – UK Borrowing
Humphrey Percy
Wed 21 May 2025
UK Borrowing Another one for the pub quiz in case it comes up: UK government borrowing stands at £2.8 trillion or £2800 billion. While you digest that number over the chicken in the basket if indeed you are already in the pub, it will have increased by the time you get to the end of this […]
Daily Brief – The Art of the Deal
Humphrey Percy
Mon 19 May 2025
The Art of the Deal Today the UK Prime Minister will be announcing the fruits of his weekend labours after meeting the EU not as an accredited delegate but in a side session on the fringes of the EU Summit in Albania. What was on the table? Youth mobility, which is pol speak for 24-30 […]
