SGM-FX insights

Overrated Rates The unwinding of USD implied short term interest rates shouldn’t be underestimated. Take a brief look at changes in FX swap pricing over the past few months and you’ll see just how significant those interest rate expectations have proved to be. Particularly within GBPUSD, the difference is enormous. Post-pandemic inflationary pressures affected the […]

EU Rate Cut With EU core inflation now reported to be 1.7% led by both France with inflation of 1.5.% and Spain at 1.6%, expectations are now running high for an ECB rate cut of 0.25% on October 17. The EU inflation target is 2% so on that measure alone the market is right in […]

Berlin and Rome As we have written several times recently the German car industry is going through tough times as is the Italian car industry especially given the hard date of 2035 when the sales of diesel and petrol fuelled cars will no longer be permitted. Now their respective governments are indicating a softening of […]

Unwinding Aussie? In recent months the Australian and New Zealand Dollars have both been able to recover ground against a weakening US Dollar. Set backs to the progress made amongst the Antipodean currencies has largely been down to changes in global growth expectations. With the soft landing narrative still just about alive thanks to the […]

British Pound The news that Goldman Sachs is predicting a GBP/USD level of 1.40 in the next 12 months reflects the positive sentiment based on interest rate differentials as we wrote yesterday plus a re-rating of the USD which seems less certain given the current geo political turmoil-see below. However GBP is now enjoying its […]

A reason to rally GBPUSD yesterday surpassed recent highs. Of course, the main driver of this move has been the prospective of a positive yield differential in favour of GBP between the two currencies thanks to the outsized Fed cut and subsequent BoE hold. This move has been so significant that as of yesterday, within […]

Ukraine Loan Russia has FX reserves of EUR 270 billion of which EUR 210 billion sits in Euroclear Brussels. The EU has stopped short of seizing those reserves which would be illegal but has come up with EUR 35 billion of the EUR 50 billion pledged to help Ukraine internationally. How? By borrowing EUR 35 […]

Bank of England As expected the Monetary Policy Committee left UK interest rates unchanged following yesterday’s  50 basis point cut in the USA and last week’s 25 basis point cut in the EU. Inflation at 2.2% is creditable given where it has been and for the moment it looks unlikely that the UK will cut […]

The Market MarchThe wait is over. In their much-awaited September monetary policy decision, the Fed has opted for a 50-basis point (0.5%) cut to benchmark interest rates in the USA. Even with the hindsight of the Fed’s explanation for its decision and the comments that accompanied the publication, it is hard to feel the Fed […]

EU Business Sentiment Looking at the overall EU business sentiment, the Germany ZEW business sentiment mirrors it: both are at a 1 year low. Maybe just maybe later today the Federal Reserve could deliver a shot of adrenaline to the US and by inference the global economy with a big booster of a cut. Meanwhile […]

Second thoughts With last week’s all-important data providing what can only be described as a mixed picture of the US economy, markets appear to be having second thoughts over the Fed’s meeting this week. With a heavy focus on the labour market over the last few months, it seemed last week that fears of excessive […]

China A snapshot of China today gives more than a strong indication of the likely effect on the rest of the world’s economies. In August, China had record breaking temperatures – the highest for 60 years which was further exacerbated by thunderstorms which affected agriculture sending vegetable prices 22% higher than 1 year before. Despite […]