Humphrey Percy Chairman and FounderWed 29 Mar 2023
UK Food Inflation
If you doubted it, the evidence is there to see: food prices are at an all time high and a large part of the problem is sugar which is up 9% in the past year. Despite victory on inflation being declared in some quarters, the food inflation index has not received the memo: last month it was showing +14.5% but this month it has actually increased yoy to +15%.
The interest rate argument is at the fore of market minds and given what the Bank of England needs to do to cap inflation, the conclusion is inescapable that rates will need to rise further and will need to stay higher for longer in the UK. The consequence of that is for the market to overlook the poor economic outlook for the UK and to concentrate on the attraction of being paid for holding GBP through higher rates. GBP firm.
The fastest journey from health to death since Barings
When Bank of England Governor Bailey used this analogy yesterday, not only was it a gaffe comparing the 16th largest bank in the USA in 2023 to a small UK merchant bank that imploded in 1995, it was also historically inaccurate. Barings was under capitalised and hugely over leveraged through the exchange traded derivatives market. Barings also suffered from a notorious rogue trader with management blissfully unaware that resulted in what became a fraud. Silicon Valley Bank was well capitalised for the activities that the US regulators thought they were undertaking, but mismanaged and illiquid. SVB’s demise was a direct result of its most senior management taking an enormous interest mismatch position. Hopefully the Governor will have his finger rather more on the pulse of fighting inflation than as a markets history commentator.
Seeing gold flirt several times in past weeks with the psychological $2000 level, gold bugs are on alert for gold to jump from its current $1,965 through $2,000. Chartists however are clear that the range of 1,600 to 2,000 remains intact with recent Central Bank actions effectively capping gold at current levels.
Of course it was and of course written by the Carpenters as it entered the charts in a lowly position this day in 1975. So convinced were Karen and Richard Carpenter that it would NOT be a hit, that they bet their sound engineer $1000 it would not. A case of money well spent and a sound hedge (no pun….. boom boom)
After long enough of being alone Everyone must face their share of loneliness In my own time, nobody knew The pain I was goin’ through And waitin’ was all my heart could do
Hope was all I had until you came Maybe you can’t see how much you mean to me You were the dawn breaking the night The promise of mornin’ light Filling the world surroundin’ me When I hold you
Baby, baby, feels like maybe Things will be all right Baby, baby, your love’s made me Free as a song, singin’ forever
Only yesterday when I was sad and I was lonely You showed me the way to leave the past and all its tears behind me Tomorrow maybe even brighter than today Since I threw my sadness away Only yesterday
Discussion and Analysis by Humphrey Percy, Chairman and Founder
Japan Some of the market’s Great Minds spent yesterday afternoon debating whether Japan could get away with raising interest rates at the same time as the Central Banks from the other major markets are starting to cut their interest rates. In short, Japan can and probably will, since its monetary policy has been effectively in […]
Rather you than me, Christine As we and the market alike have been speaking about recently, Eurozone rates are all the rage. As we highlighted yesterday, the path for rate cuts next year has already captivated the market with easing being forecasted as early as Q1 2024. As we approach the Christmas period, we must […]
European Interest Rates More momentum on rate cuts in the Eurozone as expectations grew for cuts starting in March and totalling 140bps in 2024. Equally in the UK cuts of 130bps starting in June are being pencilled in to market calendars. What this means is that GBP/EUR is looking more than especially good value at […]