SGM-FX insights

Stagflation and the USA   In the 1970’s for anyone who can remember, the USA experienced the economic environment called stagflation notable for high unemployment, high inflation and low economic growth. As inflation rises investors sell bonds resulting in lower prices and higher yields which in turn prompts those investors to sell equities as well. […]

Euro Interest Rates and the ECB   Interest rates lower for longer to boost inflation and fears expressed about the impact of Covid on the Eurozone economy: no change there. Amid all the usual dry ECB delivery is the deathless phrase where the ECB commits to deliver “a persistently accommodative monetary policy” which President Lagarde […]

ECB: From Nothing to (Maybe) Something   For most of this year, you could have bet that the July ECB meeting would not be anything to either get excited about nor a meeting to expect any currency-moving impacts from. In fact, markets put their money where the mouth was, pricing volatility at extraordinarily low levels […]

Global Happiness   Health and wealth plus freedom of life choices together with social support are the prime drivers for what constitutes happiness. And the happiest country in the world? Fun loving Finland, followed by Canada, Israel, Uruguay, USA, Norway, Sweden, Germany, Netherlands, Denmark, UK, Switzerland, Australia and New Zealand. At the other end of […]

GBP Call   GBP has fallen in a controlled and predictable fashion since its peak right at the beginning of June. The rejection of tighter monetary policy at the bank of England and approaching technical resistance levels north of 1.40 on GBPUSD sealed the short-term fate for Sterling. Now approaching a fragile but extant price […]

Political Risk Trade   With the unrest succeeded by the wave of rioting in South Africa, markets are looking at ZAR but also other emerging market currencies that are vulnerable to similar political risk. As a strategy it involves buying CHF or USD or EUR against emerging market currencies in anticipation of those emerging markets […]

China   The world’s second largest economy has bounced back from the pandemic supported by pent up export demand and policy support, however there is a suggestion in recent data releases that momentum has slowed. The expectation is growing therefore that the PBOC may cut the all important prime lending rate which will give an […]

Loonie?   Amidst signs of rising inflationary pressures and a strong recovery in underlying economic activity, Canada joined the early recovery club early on. With strong fundamentals of its own and the expectations of a spillover from its outperforming neighbour, the United States, the Bank/Banque signalled its intent to normalise policy ahead of many of […]

Italian Government Bonds   Traditionally, Italian Government Bonds BTP’s have been volatile and often de-linked in their movements with the benchmark German Government Bonds. Interestingly this has changed markedly for 3 reasons in the past months: first the ECB bond buying programme, second the European post pandemic EUR800 billion fund of which EUR200 billion is […]

It’s still coming home..   But not for the three lions on a shirt. Instead, one line on a chart: retail sales. The release from the latest coronavirus lockdown saw investors, consumers and businesses alike participate in the economy in a way they hadn’t since the pandemic begun. The explosion of demand into markets from […]

The Wild East   Investors with especially strong constitutions looking for yield should take a deep breath then investigate China’s corporate bond market. More than $200 billion of debt has been issued by 80 property developers to finance China’s real estate market which accounts for 30% of the economy. 3 year debt currently yields 18%pa […]

Chinese Yuan   The People’s Bank of China yesterday pledged to keep the Yuan stable and will make adjustments to its policy tools to help China’s struggling exporters. For example the amount of cash reserves that banks need to hold could be reduced which will feed through to and assist small firms that have been […]