Tag Archives: Dollar weakness


Morning Brief – Global Markets

Global Markets


Oil closed above $41 (WTI) after POTUS clarified remarks about the status of the China trade talks which he announced remained intact. Markets were relieved and equities had a further positive day with FTSE up 5% from its lows last week and the US markets still back to their highs of earlier in the year. EUR is back at its best level since March versus USD and Gold at $1782 remains firm but has halted its rise after the initial rally of a month ago. Bitcoin for those of you with a crypto interest is at $9687 where it is currently finding it hard to break through the psychological $10,000 barrier.





Those with Alitalia vouchers or who are awaiting vouchers will be pondering whether they are likely to be better off on the news that the Italian government is poised to nationalise the airline which is down to its last EUR 232 Million of cash. On balance it must be better as it will make it harder in the future for Italy to shrug, say “Basta “ and walk away. For those of us who are wistfully looking at pictures of the Amalfi Coast, Rome, Venice and the Costa Smeralda from previous years, we are just thrilled at the prospect of being able to travel to Italy once again later in the summer. Meanwhile…

Cornetto anyone?!



Mick Fleetwood: 78 today


Mick Fleetwood has enjoyed what is euphemistically called a full life. Married four times including twice to the same woman, Mick is currently single and worth $20 Million having by his own admission spent tens of millions on partying and recreational drugs. At 1.95 metres the best known native of Redruth, Cornwall has drummed his way through various combinations of Fleetwood Mac in the past 57 years since he embarked on his musical career in 1963. Far and away Fleetwood Mac’s most lucrative album was the 1977 Rumours which sold 40 million copies(and counting) and here’s part of their excellent song, Songbird:


For you, there’ll be no more crying
For you, the sun will be shining
And I feel that when I’m with you
It’s alright, I know it’s right


To you, I’ll give the world
To you, I’ll never be cold
‘Cause I feel that when I’m with you
It’s alright, I know it’s right


And the songbirds are singing
Like they know the score
And I love you, I love you, I love you
Like never before




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Social Media Activism

Social Media Activism


The most controversial arena in politics over the past decade has arguably been online. From election scandals to fake news, Cambridge Analytica to Brexit, the way campaigns are received online has shaped the course of politics. Now social media is fighting back and is taking credit for President Trump’s embarrassment at his campaign’s Tulsa rally on Saturday night.


The Presidential race this year has been overwhelmed by the Coronavirus. As lockdowns have eased across the United States, the President and his Democratic rival are keen to kickstart their 2020 Presidential campaigns. The Republican Party rally that took place on Saturday evening was supposed to be a key public engagement for the President. Planners had forecasted a bumper turnout for the Oklahoma rally and the show of Republican force despite coronavirus was supposed to reinvigorate the President’s ailing campaign. What the President arrived to was thousands of empty seats.


The rally was forecasted to be so busy that campaign managers had even planned spill over areas where people could be entertained whilst watching the address from afar. In the end, there was plenty of room for all. The culprit? Korean pop and social media. In times gone by that may have been an unusual cocktail to blame presidential election woes upon. However, a campaign on social media platform, TikTok, coordinated fans of K-pop music to register en masse for the rally using their mobile numbers but, crucially, not turn up to the rally. The group managed to deceive the Trump campaign and the empty seats that the President stared out to on Saturday evening satisfied their efforts.


Overnight there was a volatile episode within foreign exchange markets. A dramatic risk-off move was created when the White House’s trade advisor Peter Navarro commented that the US-China trade deal was over. A rapid appreciation in defensive assets including the Japanese Yen and Swiss Franc took place at the expense of risk assets including emerging market currencies and equities. The move rapidly reversed when President Trump took to Twitter to announce that “The China Trade Deal is fully intact”. The Pandemic has not been a good breeding ground for Trump’s volatile style of Politics. His approval ratings have suffered and unsurprisingly his polling prospects have worsened. It is possible that in order to make up some ground we see a more presidential President in the coming months before the US election.




Discussion and Analysis by Charles Porter

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Morning Brief – Germany



Jenns Weidmann, President of the Bundesbank has made a call this weekend which the rest of Europe including the UK would do well to heed-if indeed as we all hope that it is correct: Germany’s economy has passed the low point of the crisis caused by the Covid outbreak. So by definition, the only way is up. GBP at its lowest versus EUR in the past 2 months as EUR has a firmer look about it.



Saudi Arabia


The KSA Ministry of Tourism has announced plans to launch a tourist development fund with an initial capital of USD 4 Billion. Those who have visited the Kingdom will wonder how the initial challenges including the following will be overcome: long and difficult immigration procedures upon arrival, alcohol and other tourist recreational expectancies being forbidden, segregation of sexes on the beach and…the list continues. However, Saudi Arabia has long held this ambition and given the sheer size of the country, it must be feasible to create zones where more tolerance can be practised away from the hawk like watch of the religious police. One thing is for sure: KSA needs to diversify away from its dependence on oil- although with WTI establishing a new base at $40 that is looking much better than a few weeks ago. Saudi Riyal impervious to all this and steady at 3.75 v USD.





Between June 25 and July 1 Russia will vote on whether President Vladimir Putin is to be allowed to run for a further 2 6 year terms starting in 2024. Putin is 67 and will be 71 then so that would take him up until 83 years of age. Russia has a history of elderly statesmen but if Putin stays that long, he would comfortably eclipse all other Russian leaders times in office and all but one, Gorbachev in age who died at 89 but that was because he sensibly retired to his dacha outside Moscow at the age of 60.

Meanwhile on international markets the Rouble has strengthened versus USD to 69.42 in the past month in line with the rise in oil.



Summer Solstice


Yesterday saw top Druid King Arthur Pendragon aged 62 interviewed on BBC to mark the Summer Solstice and to explain why all good Druids should stay away from the A30 and the sacred site of Stonehenge. SGM-FX’s Charles pitched his tepee near Bishops Stortford over the weekend at his own rather small festival and apparently lit a couple of joss sticks before putting on some chanting on his iPhone  as he welcomed the sunrise over a glass of his French pale Rose wine favourite, Whispering Angel. You can keep the Druid in Charles away from Stonehenge but you just can’t keep the party animal in him down for that long!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Kiwi Dollar

Kiwi Dollar


The Kiwi or NZD has strengthened sharply in the past two weeks versus GBP. It was only at the beginning of April that it was trading at 2.10 and now has broken its previous resistance a 1.95 and has broken through to 1.93. GBP has of course weakened across the board but the commodity currencies including now the almost COVID free NZD have bounced back sharply from the dog days of a few weeks ago.



Luxury Goods


Chanel the flagship fashion brand has announced that it expects the impact of COVID to last for 2 years in the sector. However, because they can, and to protect their brand Chanel has also increased the prices of many of their sought after products citing higher costs of raw materials. So the price of that handbag you might have had your eye on has likely been increased by at least 10%. Chanel had 2019 revenues of $12.3 Billion and a healthy operating margin so can well afford to weather the storm raging through the luxury brand market.



World Sauntering Day


Today 19th June as almost nobody knows is that day. Established in 1979 at the Grand Hotel Mackinac Island  in Michigan USA in response to the then new fashion of jogging, sauntering or rather the art(?) of walking in a relaxed fashion is supposed to get us all to slow down and enjoy life. SGM-FX sauntering specialist Euan was seen trying out by throwing some slooow shapes along a near deserted Eastcheap during his lunch hour yesterday, his first day back in the office since 20 March.


Have a great sunny and healthy weekend!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Growth


The word growth over the past few months has usually involved a discussion about the spread of Covid-19 and the change in the number of infections. But in normal times economic growth is discussed more as one of the main drivers of the value of a currency. Coupled with an appreciation of relative interest rates and you’ve got a fairly crude but workable model of the foreign exchange market. The virus has distracted classical projections of currency valuations based upon growth and economic fundamentals bringing about a new problem: How do you value a currency when each nation is in the same boat? Interest rates have tumbled towards zero in most developed economies and growth prospects are all dire.


I’m going to stick with the nautical theme to explain further. Let’s say you’re trying to figure out the path of G-10 foreign exchange – I.e the winners and losers out of USD, EUR, GBP, JPY, AUD, NZD, CAD, CHF, NOK, and SEK. Consider each of them a boat in a race across the Atlantic. Normally you’d place your bets based on the fundamentals of each competitor: how fast is the boat, how experienced is the crew, recent form etc. As the race progresses you’d trim or increase your positions on one or more boats based upon how that boat had got on in the race so far. For example, if AUD looked the best on the starting line but went the wrong way you’d start to shift your bets elsewhere.


But what happens when right in the middle of the race an almighty storm starts blowing? The relative position of the boats would be increasingly meaningless. Stuck in gale force winds in the middle of the Atlantic the question now is about who survives and can stay afloat. Even if you were on one of the racing boats you wouldn’t care which way you were facing you’d just try to keep your boat and crew above water. Those betting on the race would take as much risk off the table as possible but if they couldn’t exit betting altogether they’d orientate their bets on which ship they think is most likely to stay afloat.


That’s exactly what has happened in foreign exchange markets. The Covid storm initially necessitated valuations based upon a currency’s ability to weather the storm. In the height of the first wave of the pandemic, huge stimulus packages initially provided ballast to their vulnerable economies. This support was able to attract some value back to the currencies they concerned. Risk sentiment also became an even larger factor in market-wide foreign exchange valuations in the form of fluctuating feelings on whether the storm might go away altogether and will the race resume. As we enter the second stage of Coronavirus an air of normality is returning.


Stimulus is still important and there is no shortage of risk sentiment-induced FX flow. Markets continue to monitor the probability of a second spike with data coming out of the United States and China in the last few days painting a gloomy picture. In the UK today the Bank of England will present its latest monetary policy decision. The market is expecting an increase in the QE program of at least £100bn with a hold in interest rates at 0.1%. As ever the discussion surrounding economic projections and the potential use of negative rates will also be important for the value of the Pound.




Discussion and Analysis by Charles Porter

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Morning Brief – Indian Railways

Indian Railways


Owned by the Indian government, Indian Railways in normal times operates 20,000 trains a day, has revenues of USD 28 Billion per annum and employs 1.3 Million staff. India has committed to electrify 100% of the network by 2023 and be carbon neutral by 2030. For any of you who have travelled on the 40% of their trains that are still burning coal, this feels ambitious, but who knows?! This week Indian Railways have announced that they are converting 500 railway carriages into hospital wards and at a stroke will create 8,000 new beds, so maybe that carbon neutral target in 10 years time is indeed achievable. Meantime India is both wanting and getting more hospital bed capacity- courtesy of Indian Railways.



The Sandwich


The story of how the sandwich was invented by John Montagu, 4th Earl of Sandwich who called for a late night snack of some meat between two pieces of bread is fairly well known. The trend caught on and pretty soon all of the aristocracy were ordering Sandwiches which then was a fad taken up by the rest of the populace. The Wall Street Journal described the sandwich as Britain’s biggest contribution to gastronomy which shows a singular lack of appreciation by our American cousins for other terrific contributions including Toad in the Hole, Jam Roly Poly, Spotted Dick and Shepherds’ Pie.

Moving on swiftly, the sandwich is facing a crisis with sales having fallen over the past 3 months in most cities by at least 50% and in London by 90%. Don’t write it off too soon as it’s a question of picking the sandwich bars that will survive such as, in our view at least, private equity owned Pret a Manger. Shares such as Greencore(down 24%) and Greggs are also worth following. Just in the UK, the industry is worth more than GBP 8 billion and employs more than 325,000-twice the Armed Forces and 5000 more than Tescos. Following the slur above from the WSJ, I researched the most popular sandwich in the USA, and the answer was grilled cheese. Unimaginative? Enough said!



Carole KingE


It was this day in 1971 that her album Tapestry went to Number 1 in the USA and stayed there …..for 15 weeks. Aged 78, 4 times married but now single and worth in excess of USD 70 Million, Carole KIng is batting on singing and writing , but Tapestry still has the definitive collection of her very best songs Including: You’ve Got a Friend


When you’re down and troubled
And you need some love and care
And nothing, nothing is going right
Close your eyes and think of me
And soon I will be there
To brighten up even your darkest night


You just call out my name
And you know wherever I am
I’ll come running, to see you again
Winter, spring, summer or fall
All you have to do is call
And I’ll be there
You’ve got a friend




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Interventions



State intervention in the foreign exchange market is a taboo subject. On the one hand, each nation holds and reports reserves of foreign currencies that are seen as critical to financial and economic stability. On the other hand, if a nation uses those reserves too aggressively then it risks being labelled a currency manipulator. The US Treasury takes this very seriously and under its Competitiveness Act of 1988 it seeks to name and shame these countries for their efforts in “gaining unfair competitive advantage in international trade”. The repercussions do not stop at a mere pointing of the finger. Once labelled a currency manipulator the United States will pursue the elimination of this unfair advantage with the International Monetary Fund. The line to be trod between intervention and manipulation is therefore a very important one.


The United States and other developed nations care so much about currency manipulation because if foreign currencies are ‘undervalued’ the goods that trade within them are relatively cheaper. Take an identical good sold in China and the United States. If the good is worth $100 and sells for ¥700 then provided the USDCNY exchange rate is 7 then those goods are equally competitive – the consumer’s decision of whom to purchase from will not be influenced by price. However, if the People’s Bank of China steps in and sells CNY like there’s no tomorrow and buys USD in exchange and the USDCNY exchange rate moves to 8 then there’s a difference. Provided the Chinese vendor keeps the price at ¥700 then the relative value of that product in US Dollars in $87.5. Under these conditions the US claims an unfair advantage and pursues you with the combined weight of the US Treasury and the IMF. In truth then, currency manipulation only becomes the subject of politics and international relations when a country is seeking to devalue its own currency. It’s a little crude, but observation dictates that devaluation is manipulation and currency support is intervention.


Due to the huge sell off in emerging market currencies towards the beginning of the pandemic we have seen increased ‘interventions’ in the foreign exchange market. Whilst a currency devaluation like the one in the example above is good for competitiveness as far as price is concerned, sharp swings lower in the value of one currency destabilise investor/consumer willingness to trade with that country. If a currency loses 50% of its value against the Dollar, for example, you might say that is was a bargain. But at the same time, you’ll question what’s wrong with it and reconsider your purchase of the currency in question on the grounds that it could go lower.


We did in fact see these kinds of movements amongst the emerging market currency basket. The Brazilian Real, the currency of a nation that we now know to have the second highest COVID-19 death toll in the world, lost more than 50% of its value versus the US Dollar at the peak of the pandemic. South Africa’s Rand and the Mexican Peso lost close to 40% each versus the Dollar. The deteriorating sentiment towards these nations and the risk of capital flowing abroad prompted FX market interventions from these countries as well as others.


As of the beginning of June emerging market economies had burned through over $240bn in foreign currency reserves since the beginning of the pandemic. The main protagonists were China, Hong Kong, Saudi Arabia, Brazil and Turkey who had the largest changes in their net foreign currency reserves. Many emerging market nations are still fighting foreign currency outflows with Turkey alone in the last week spending around $1.5bn of its already depleted reserves in order to support the Lira. Due to the improvement in risk sentiment the market is helping to restore some of the value in emerging market currencies that was lost during the pandemic.




Discussion and Analysis by Charles Porter

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Morning Brief – FTSE



Four months ago in the more innocent days of February, FTSE stood at 7,500 before plummeting to 5000 in late March. Now at 6,100 FTSE is looking less certain despite the historic degree of support and stimulus from the UK Government and while the US market has largely shrugged off March with the S&P within 10% of it’s pre crisis high, as can be seen, the UK market has not. Optimistic market watchers point this out as representing an under valuation of the UK market, but what is missing for the market to strengthen further at present is the strategic vision for the UK post Covid and post EU.



Austrian Airlines


The Austrian flag carrier and subsidiary of Germany’s Lufthansa currently has 7000 employees and is due to reduce that number by 1100. It seems counter intuitive that as restrictions in European travel particularly in the Schengen area are being lifted this weekend, that Austrian should make such an announcement, but it is a measure of not only the past 3 months but also the outlook for the next 6-12 months that airlines are having to fight not so much for market share but for survival. However with the recent injection of EUR 10 Billion into Lufthansa by the German government and the insatiable desire by the German speaking countries to get those towels on the sun loungers before the Brits, French, Dutch etc etc, that it would be unwise to bet against the intent of the Lufthansa Group to win through.



HMM Algeciras


This is the largest container ship in the world measuring the same size as 4 football pitches at approximately 400 metres by 60 metres and it arrived yesterday at the Thames gateway port at Thurrock, Essex in the Thames estuary having set off from China via South Korea, Germany, Belgium and the Netherlands. Having unloaded in no time at all due to the world class port facilities at Thurrock, it leaves later today taking goods from the UK back to China. HMM stands for Hyundai Merchant Marine and is a South Korean operator and has invested USD 140 Million into the Algeciras. These ULCVs or Ultra Large Container Vessels are the way to transport goods across the world most efficiently and Thurrock’s facilities are going to be even more key for the UK post the 31-12-20 EU exit.



Royal Ascot


No I have not lost it and yes Royal Ascot is on and starting tomorrow for the next 5 days-although alas with no spectators. All races will be shown on Sky Sports and race two onwards on ITV. Prize money is halved from £7.3 Million to £3.8Million. These are the statistics for what Royal ascot normally means:


350 chefs serving food

5,000 kilos of salmon eaten

8,000 Cornish crabs eaten

3,500 lobsters eaten

10,000 steaks eaten

7,000 rumps of English lamb eaten

250,000 finger sandwiches eaten

120,000 buttermilk scones eaten

110,000 cups of tea drunk

1,200 kilos of clotted cream eaten

400 helicopters and 1,000 limousines descend on site


Keen racer SGM-FX’s very own Graham has assured us all today on the daily SGM-FX video conference that his screen will be firmly locked on to Bloomberg this week and that he will be constraining himself to just a few of those buttermilk scones together of course with the strawberry jam and clotted cream.

Given his previous year’s betting record, this will represent a major win for his wallet if not for his waistline! And they’re off!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Global Markets

Global Markets


Following the Federal Reserve’s downbeat forecast, markets duly gave up some of the gains they have enjoyed in the past few trading sessions since the US Employment figures of last week Equity markets were down and the S&P after close in Europe by 5% which bodes badly for the end of the week in Asia and Europe, Oil fell back to $38, USD improved markedly across the board. Incoming and helmets on, as we used to say at the German bank I once worked at!



Food Delivery Companies


Amazon’s takeover of Deliveroo is still ongoing or rather it will be once the UK Competition Authority opines on the Competition Rules governing that deal. But yesterday the take out market was electrified by Amsterdam based Just Eat Takeaway agreeing a USD 7.3 Billion price tag to acquire US company Grubhub. Analysts were chewing on their pencils rather than their pretzels on this one as they cannot make it worth more than USD 6 Billion and so Just Eat Takeaway shares duly declined by 13%. This may all seem out of this world, but the move towards further home delivered food and the increased valuation of any company in that sector with distribution and brand is another wave to catch.



Santander Group


It is not just Covid but it certainly has speeded up the requirement to achieve further efficiencies and cost savings across the financial world. Santander is already ahead of the banking average in terms of its overall level of efficiency but have announced a couple of eye catching targets: First:Cost savings of EUR 1.2 Billion worldwide of which EUR 1 Billion to be in Europe. Second: Recruiting 3000 I.T professionals worldwide of which 1000 to be in Europe. Readers with enquiring minds will query the apparent dislocation of these two targets, but the answer is that Santander already has a very significant I.T. Department in Spain. What is clear is the inexorable drive to automate and digitise financial services even more widely.

SGM-FX I.T. guru and cactus lover Michael had a gleam in his eye and a spring in his tone of voice as he reported this trend towards I.T. Nirvana (his words) during yesterday’s in house daily Video Conference.





This marks the 17th anniversary of the establishment of T20 or Twenty Twenty in the cricket world. Purists of the game may shudder but most cricket fans whether players or spectators welcomed what was essentially a marketing ploy in 2003 to create a resurgence in interest in what had become a flagging sport. It worked and has given joy and excitement to crickets of all generations.


Have a great, sunny and healthy weekend!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Less Fireworks; more Firefighting

Less Fireworks; more Firefighting


Last night the Fed voted to keep US interest rates between 0%-0.25%. I’m not sure about you but having only recently witnessed emergency meetings slashing the benchmark rate and pledging to buy corporate securities the meetings seem somewhat mundane! Even if not quite as unexpected, the Fed’s decision last night has implications for a whole host of market participants. The Fed is currently buying about $20bn worth of US treasuries per week and last night it built up expectations that this monetary backdrop could last even longer than the market had previously thought.


Last night’s announcement comprised of the monetary policy decision, a press conference and the latest fed forecasts. Each of these three elements has a worthwhile story to tell. Firstly, the decision itself showed that the Fed does not expect rates to rise at all until at least the end of 2022. The announcement extended expectations of a protracted recovery and pinned yields at the far end of the yield curve at record lows. The factor blamed in this decision was unemployment.


This takes us neatly into the Fed’s predictions and point two. The latest forecasts from the monetary authority show unemployment falling to 9.3% on average this year. There is an anticipated improvement to 6.5% next year but the projections fall far short of the sentiment created after Friday’s stellar non-farm payroll report. Unemployment concerns undermined some of the recent recovery in asset valuations with stocks selling off heavily in Japan, Australia, Hong Kong and China this morning. The destabilisation of sentiment has also encouraged a bid into the US Dollar this morning thanks to an increase in global demand for defensive assets.


Ahead of last night’s decision the market was debating whether the Fed might embark upon a path of explicit yield curve control. Such a move is an extraordinary monetary policy tool explicitly limiting the range that debt instruments of all durations can trade within. It would be a hyper-dovish move from the Fed and the monetary equivalent, if you like, of a severe lockdown. The press conference made clear the Fed was not embarking upon this path and the Dollar has partially recovered this morning on the back of the Fed’s decision not to discuss this policy measure.




Discussion and Analysis by Charles Porter

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