SGM-FX insights

UK Interest Rates At 5% UK rates are at the highest level since 2008. While market expectations were still mostly for a rise of 25bps, yesterday morning ahead of the announcement there was a rising chorus calling for 50bps led by the Financial Times. In the event the voting was 7-2 for 50bps and the 2 were […]

Central banks in the driving seat  Following testimony from Jay Powell that dominated trading yesterday afternoon, attention will today once again shift to the Bank of England. The BoE has been in the spotlight as UK inflation data continues to trend above similar statistics being released in other developed economies. Yesterday, the most recent reading […]

Oil WTI Nymex oil was down $1.53 from Friday’s close yesterday at $70.25 despite China cutting two benchmark lending rates by 10bps each for the first time in 10 months. No improvement in demand is discernible and oil traders are looking for signs of a sustained increase in Chinese demand-forecasts suggest an increase in that […]

Global demand  There are very few outliers to the global inflation and monetary adjustment phase that we are currently enduring. The variation between nations is largely limited to what phase of the adjustment they are in. The spectrum ranges from the ECB or BoE’s catch-up meeting-by-meeting hikes, to the Fed’s let’s take a break, all […]

Sterling and the Bank of England On Wednesday the BoE Monetary Policy Committee will, having braced itself for the release of the latest cost of living figures, have to vote on a change in UK interest rates. Most observers believe that the split in the committee will be a sizeable majority for a rise of […]

European Central Bank The language has changed and the ECB set a whole lot of new records yesterday: firstly the language has gone from it will all be ok on the night to, these are the facts and we need to be pragmatic. Growth is stagnating and inflation is only moderating. If there is a […]

Hawkish Pause  Jargon used when discussing central bank decision making and communication normally involves the words ‘dovish’ or ‘hawkish’. Descriptions of a dovish decision or attitude refer to the central bank steering away from tighter monetary policy and higher rates on interest. By contrast, decisions and commentary described as hawkish refer to a central bank […]

UK Wage Growth Average earnings up 7.2% over the 12 months to April outstripped market expectations of 6.9%, but never mind that, it will cause furrowed brows at the Bank of England’s Monetary Policy Committee as they meet today. Unemployment at 3.8% is better than the 4% expected. What these two stats mean is that […]

Recession risk  Right about when the world woke up from the ‘inflation is transitory’ narrative and started adjusting rates, recessions were priced in across the globe. It was assumed that the central bank action to raise interest rates in the face of inflation would ultimately have a costly impact upon growth rates further down the […]

US Payroll and Fed Implications Numbers in the public and private sector jumped 339,000 rather than the 190,000 expected in the May release which came out on Friday afternoon. The Federal Reserve had managed rather cleverly to have lulled the market into accepting that there would be no need for a rate hike in June […]

OECD The cheerful folk at the OECD were at it again yesterday (Brit bashing) with the forecast that the UK will in fact have the worst inflation of any of the OECD nations at 6.9% this year. That means, conclude the market savants that interest rates will have to stay high for longer (no real […]

Canadian Curveball  Canada was one of the first movers globally to raise interest rates in the face of rising inflation. Whilst much of the rest of the world, including the US, the Eurozone and the UK were still sitting on their hands claiming inflation would be transitory, Canada was busy hiking rates. The nature of […]