Morning Brief – V or U?

Morning Brief – V or U?

Wed 1 Apr 2020

V or U?


Studying the various analyses issued throughout the day from the Far East through to Europe and on to North America on this topic, it is important to appreciate that the authors of these reports simply do not know whether the economic recession is going to be a sharp V or a long U. It all depends (obviously) on when everyone from Wuhan to Western Europe to Washington can all get back to work. And that depends on a whole range of known unknowns, as Donald Rumsfeld once said in respect of Iraq, and therefore in a completely different context.
All I can say is that within an hour or so yesterday, two completely conflicting reports were issued: the first set out to prove that the Chinese economy was on a path to fully recover in the course of 2020 ie a sharp V. The second was headlined that economists had now given up on the likelihood of a V shaped recession and had resigned themselves to a long U.
Yesterday was no different than most days In the recent past: volatile equity markets, wide ranges in currency pairs, oil weak then strengthening etc etc. As we closed the first quarter of 2020 we looked back to our prediction at the end of 2019 that Q1 would see increasing volatility-that is the understatement of the past year and in fact a great deal longer!
At SGM-FX we have succeeded in creating a single virtual office from 14 different locations in the past two weeks and our continuing aim is to deliver the same seamless service to you from those remote locations that we normally provide from 41 Eastcheap.
So from places including E14 to Harrow to Stevenage to Stratford to Islington to Bexley to Dartford to Sandhurst to Putney and the list goes on, we at SGM-FX wish you a healthy and happy Q2 2020.



April Fools Day


It is always tempting to write something of a spoof on April 1st, but I will not do so given the fact that in the present circumstances in particular that might lead to an expensive mistake being made if someone took a decision based on such a false premise. Instead I have researched the Top 100 April Fools of all time and I am pleased to report that in Number One position from 1957 is the BBC Panorama spoof which did the job in spades and remains one of the greatest funny hoaxes of all time. Here it is:


April 1, 1957: The respected BBC news show Panorama announced that thanks to a very mild winter and the virtual elimination of the dreaded spaghetti weevil, Swiss farmers were enjoying a bumper spaghetti crop. It accompanied this announcement with footage of Swiss peasants pulling strands of spaghetti down from trees. Huge numbers of viewers were taken in. Many called the BBC wanting to know how they could grow their own spaghetti tree. To this the BBC diplomatically replied, “place a sprig of spaghetti in a tin of tomato sauce and hope for the best.” Even the director-general of the BBC later admitted that after seeing the show he checked in an encyclopedia to find out if that was how spaghetti actually grew (but the encyclopedia had no information on the topic).



Coming of Age: The Euro


Just over 21 years ago on 1-1-99 the European Union adopted the Euro as the common currency to replace the ECU for those first 11 member states to join. Over the next 16 years a further 8 countries signed up. And another 7 are as of now in the preparatory stage of joining. It is fair to say though, that of those 7, most of them due to economic conditions having changed, are almost certain to need to pass referendums to enable them to get the backing from their publics. 2008 and 2012 were both huge tests for the Euro and Europe for different reasons than to today. 2020 is much more about the individual countries both symbolically, and in some cases actually, having closed their borders. For the first time for more than 60 years the agenda has focused on nation states rather than common interests.

For those readers who are interested, the low versus the USD was on 1-1-02 when it reached 0.90 and the high? 1.60 in July 2008.




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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