Morning Brief – USD, EUR and GBP

USD, EUR and GBP

With the USD index which measures the currency against a basket of 6 currencies falling 0.15% to 99.753 to a 27 month low at the beginning of the world’s trading day yesterday in Asia, it would look like the USD will remain under selling pressure in the short term as markets are focused on the Federal Reserve’s interest rate tightening cycle coming towards the end.
The EUR on the other hand is at a 17 month high at EUR/USD 1.1250 as is GBP at GBP/USD 1.3025. Interest rate expectations for USD are for a final 25bp rise this month followed by a plateau before rates start falling in December while in the case of both EUR and GBP interest rates are expected to continue rising. The UK inflation number released earlier today was especially closely watched with the expectation for a fall from the previous 8.7% to at least 8.2% anticipated and the consequence if not of even more pain for UK mortgage borrowers. In the event the figure was 7.9% and as a sign of the times this still unacceptably high figure was greeted with relief and even praise.
What that adds up to is that while USD is expected to continue weakening, GBP and EUR are expected to strengthen further.
GBP/EUR 1.1595.

Turkey

We have managed to restrain ourselves from commenting on the Turkish Lira since the appointment of the new Central Bank Governor which was well received by the markets. Yesterday however TRL slumped to a new low falling 2% versus USD to 26.9 which is down an eye watering 30% this year. Expectations are for a 5% rise in interest rates to 20% on Thursday at noon UK time. Given this whopping rise in interest rates why is TRL falling? The answer is that the market has got it into its collective head that President Erdogan is exerting his own brand of economics and interest rate rise suppression once again and that rates will not go up by 5% but more likely 1.5% which is nowhere near the level necessary to counter the 40% inflation suffered by Turkey.

World’s Favourite Airline

No longer British Airways despite its strapline which has not been the case for some time as BA is languishing at number 17 in the world rankings of airlines. No surprises to see Singapore Airlines at number 5 since it has been at the top of the chart for decades, but interesting to see that Korean Airways has made a surprise entrance at number 4 with Etihad at number 3 and Qatar at number 2, the real surprise is to see Air New Zealand at number 1. Doubtless Emirates will be scratching their heads as to how they have sunk so much cash into planes and routes to end up at number 10. The chart is based on expected criteria including safety, fleet age and passenger reviews but also rather more surprisingly profitability, investment rating, product offerings and staff relations.
GBP/USD 1.3025

European Heatwave

With temperatures due to spike upwards in the next few days across southern Europe with 40c plus temperatures while northern Europe is a world away with London at 22c and Paris at 23c, statisticians are dusting off the record books in anticipation of a new record. The highest temperature in Europe to date is 48.1c in Syracuse, Sicily that was recorded in August 2021.

Give a Little Love

Nearly 50 years later pop pickers are still scratching their heads over what was the phenomenon that was the Scottish band, the Bay City Rollers with those plaid/tartan mid calf baggy trousers, those mullets and lastly that conspicuous lack of musical talent. Never mind, here is one of their “best” songs:

It’s a teenage dream to be 17
And to find you’re all wrapped up in love
And I found that you made a dream come true
Now I do believe in what they say

You’ve got to give a little love, take a little love
Be prepared to forsake a little love
And when the sun comes shining through
We’ll know what to do

Give a little love, take a little love
Be prepared to forsake a little love
And when the sun comes shining through
We’ll know what to do

When I walk with you, there is just we two
And the world goes by but I just don’t care
And I know that one day, I’ll find the way
To be safe and sound within your heart

So until I do
I’m gonna give a little love, take a little love
Be prepared to forsake a little love
And when the sun comes shining through
We’ll know what to do

Give a little love, take a little love
Be prepared to forsake a little love
And when the sun comes shining through
We’ll know what to do

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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