Tag Archives: foreign exchange analysis

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Morning Brief – Okayama and the Hadaka Matsuri

Okayama and the Hadaka Matsuri


This weekend saw the Annual Naked Festival or Hadaka Matsuri in Okayama, Japan’s Honshu Island when 10,000 male participants braved the cold weather clad only in loincloths- fundoshi and white socks-tabi. First they run around semi naked and then around 10pm on Saturday night priests threw bundles of twigs and two sticks into the crowd. This event has been going on every 3 years for the past 500 years and it is a celebration of a bountiful harvest, prosperity and fertility. The twigs and sticks having been fought over and when the victors emerged from the scrap bloody, bruised but victorious they know that they are guaranteed a good year. The Japanese Yen remained steady on these shenanigans!



Health and Safety Nut(ter)s


Have you ever been on a plane when there is an announcement that due to there being one passenger with a nut allergy, not only will there be no nuts served but if you happen to have a cache of nuts, you are requested not to open and eat them? Cards on the table: I am more interested in the drinks trolley, so nuts are of little interest.


When on a plane last week, the nut announcement was made in hushed tones. Everyone tried to look brave at the prospect of 2 hrs in a nut free environment. It transpired that I was sitting directly in front of the nut allergist; it also transpired that he was not an infant nor a child but a 40+ American who not content with depriving us all of our nuts, went on to interrogate the crew as to whether any part of the pre-packed meal could have been handled by anyone also charged with nut packing duties. Pure Monty Python!


Surely nut allergists could/should be given a £10 discount on the fare to bring their own food? Or…..alternatively struggle by for the rather short duration by not leaving themselves open to uncontrollable nut temptation and just not eat?!



It’s not over until the fat lady sings….


As they say about opera. On Friday night it could not come soon enough for the generously proportioned diva to breathe her last. Richard Strauss may have been and achieved many things but his opera Ariadne Auf Naxos did not do it for me. Could it have been the music, the interminable German libretto, or what passed for the plot or maybe the fact that being in Poland the subtitles were in Polish…?! Whatever, the very best Kraków restaurant which is named Farina more than made up for it, and the previous 3 hours were eradicated as a Cosmopolitan cocktail was swiftly poured and served. While there was no chance she was going to get into my heart, the lyrics from the Herman’s Hermits 1966 hit, A Must to Avoid came to my mind as I thought about Ariadne …


She’s a must to avoid
A complete impossibility
She’s a must to avoid
Better take it from me


You’ll think she’s a prize at the start (Prize at the start)
But take my advice, play it smart (Just play it smart)
She’s nothin’ but trouble
Better cut out on the double
Before she gets into your heart




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – U.K. Chancellor Quits Unexpectedly

U.K. Chancellor Quits Unexpectedly


A headline like that would in former times have prompted a fall in GBP of at least a cent and definitely more at times of financial crisis. Yesterday of course GBP firmed sharply against EUR and USD in particular, which just reflects that Sajid Javid was considered damaged goods by the market.



Baltic Dry Index


The Baltic represents the best bellwether for the health of world trade since it reflects the volume of dry goods such as metals and grain that are shipped. Exactly 1 year ago in February 2019 the Index stood at 570 but by September 2019 it had climbed to 2,500. In the past two months it has tumbled to 418. Both copper and oil have also fallen sharply in the wake of the economic slowdown in China and the consequent drop in consumption. Markets are so far working on the theory that central banks will counter balance the Chinese economic effect so traders have not donned their tin helmets-so far. But that’s the thing with traders: the human nature factor and right brain v left brain-on the one hand traders say that they always doubt the accuracy (diplomatic speak) of the official Chinese economic stats, but in the same breath they admit that they slavishly follow and depend on the Coronavirus statistics that are provided by…..the Chinese!



Democrat Runners


There are now 2 distinct groups: the back markers: Joe Biden and Elizabeth Warren and the race leaders: Bernie Sanders, Pete Buttigieg and Amy Klobuchar. Andrew Yang-“the numbers guy” in his own words, did his sums and recognised that he could not win. Michael Bloomberg ( 78th birthday today) another numbers guy but with the added benefit of multiple billions, is undeclared but is still expected to join the race in the next 2 weeks as we get closer to Super Tuesday 10 March. So far markets have remained impervious to the possibility of Bernie Sanders winning both the Democrat race and the White House later in the year. The USD is markedly stronger against EUR as we explained yesterday and is seeing a flight of capital particularly from Emerging Market currencies in its capacity as safe haven currency of choice.



Desperate Measures


Earlier this week Sally Bundock the respected BBC business journalist asked for views as to why audience figures for entertainment industry awards dinners had fallen to all time lows. SGM-FX duly obliged by explaining that they were no longer relevant and boring to boot. Then it all kicked off at the NME-New Musical Express- Awards Dinner on Wednesday night with Rapper Slowthai first being nominated for a clutch of awards including Hero of the Year for his song Deal Wiv It, mooning the audience and then throwing a drink at someone before “fighting the crowd.” Phew. Quite takes us back to 1970’s soirées and being “entertained” by Punk Rocker, Sid Vicious and his squeeze Nancy Spungen- look it up! Sadly however the SGM-FX house (no pun) view on those dinners remains unchanged: Booring!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Eurovision



Resistance, support, reversal and jargon. Is pretty much what you’ll receive if you try and research the Euro’s sell-off since December 2019. If you try and read a forecast about what is going to happen to the Euro from here you’ll find even more nonsense. Here’s the truth of the matter:


The Euro yesterday evening hit its lowest value versus the US Dollar since 2017 and its weakest level versus the Swiss Franc since 2016. Although only a two (and a bit) and three (and a bit) year high respectively, the surge is important because the 2017 low on EURUSD is close to the all-time low and sufficiently weak to start discussions about parity: 1 Euro equals 1 USD and vice-versa. The immediate path of EURUSD should be uncertain. The reason is that the market has traded and turned at the price it is at today so many times that so many interests and expectations have built up around these levels. Accordingly, traded volumes should be elevated as market participants position themselves around what they think could be the next turning point.


There are three factors for the Euro’s weakness. The first two, economic in nature, are the Euro’s role in markets today and, secondly, the bloc’s economic fundamentals. With bafflingly low rates and thus yields the Euro has taken on the role of the funding currency. This means it’s the one you’re going to sell when you’re looking to buying something else to pick up a bit of real yield and interest. Sure, to take profit you’ll have to buy Euros back eventually but with futures markets telling us that interest rate expectations are still pointing towards a cut this year, it could be an incredibly long time until you have to buy them back.


Secondly, with industrial activity waning in Germany and the wider Eurozone, the threat of the coronavirus to global demand for Eurozone exports is undermining growth expectations further. Overnight the new cases of coronavirus have registered at 14,800 in a single day. It’s too early to tell whether the change in counting methodology is to blame or the reinvigoration of risk appetite yesterday driven by expectations of peak virus transmission were misplaced.


The final threat pushing the Euro lower is political. With the resignation of CDU leader Annegret Kramp-Karrenbauer announced this week, the successor to Chancellor Angela Merkel is now uncertain. In addition the development of the far-right in German politics is undermining the perception of German political economic stability.


To reflect Euro fragility, JP Morgan, RBC and Credit Agricole have immediately downgraded their forecasts for the Euro. The median forecast for 2020 year-end amongst analysts when last observed was 1.14, pie in the sky territory from where Europe opens trade this morning. The market will provide interesting enough conditions on its own at this all too familiar level but external stimulus will come from Germany tomorrow morning as we learn more about Q4 growth in the EU’s largest economy. The median forecast is for a 0.1% quarterly expansion. But approximately 30% of analysts surveyed predict a contraction for Q4. The release is scheduled for 7AM tomorrow morning. If the statistics realise a contraction then recession expectations will be back in full focus and the Euro will sink lower.




Discussion and Analysis by Charles Porter

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Morning Brief – Singapore Money Management

Singapore Money Management


In the wake of the Hong Kong demonstrations and the recent questions as to the HK authorities’ management of the Coronavirus outbreak, Singapore is making much of the fact that the number of applications for money management licenses in Singapore has increased from an annual average of 180 to 200 in the past year. One swallow does not make a summer, and there are many factors at work here including the dreaded Brexit excuse, but nevertheless it is worth noting: Singapore is profiting at the expense of Hong Kong.



Lewis Hamilton


Worth today around GBP 200M Lewis is reputedly about to jump ship from Mercedes to Ferrari for a 50% annual increase from GBP 40M to GBP60M when his contract is up next year. Just 35 years old it seems Lewis has been around for ever, but there’s plenty more to come and then there’s his post racing career which means that Lewis Hamilton is going to be a feature of sports fans’ lives for many more years.



WFH: Chinese Style


Knock on effects of the Coronavirus epidemic are many and varied, but one thing for sure is that the outbreak spells the largest ever WFH or Working From Home exercise. Citizens in Wuhei Province, China ( population 57 Million) and in particular Wuhan are being encouraged to stay at home.


Remote meetings using companies such as Zoom Video Communications, the videoconferencing company, which has seen its shares rise from $64 at the end of 2019 to $88 today are expected to increase as further worldwide travel restrictions are imposed.


However videoconferencing or WhatsApp or Email are not universally accepted as being right for all businesses as substitutes for face to face working. 54% of US workers would choose to work from home if given the opportunity- which means that 46% prefer to eyeball their colleagues around the water cooler. In France the recent strikes have exposed divisions between managers in the same companies, some of whom have insisted that their subordinates make it to work even if they have had to walk, while others have shrugged their shoulders and given instructions to work from home-“Travailler a la maison”.


Here at SGM-FX, Richard has ventured to suggest that he might be more productive by staying at home in Putney and is still pondering the answer he received: “That’s fine, Rich, but just not for SGM-Foreign Exchange…..”




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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UK buildings

Morning Brief – Oh that’s where I left it!

Oh that’s where I left it!


It takes a big lens to capture a clear image of a piece of paper from tens of metres away. But in most of those circumstances what takes far more skill and consideration is the hand placement, angle and speed of travel to ensure the photographer achieves the seemingly accidental photograph. Journalists would be forgiven for thinking Sajid Javid, UK Chancellor and inhabitant of no. 11 Downing Street, had taken up moonwalking practicing his daring performance.


A briefing paper carried into no. 10, the Prime Minister’s residence, and captured in Downing Street purports to show the UK government’s stance on Financial Services in a post-transition trade deal. It’s no Canada style and is the antithesis of Johnson’s so-called ‘Australia-style’ – whatever that is – deal. Instead it shows that the government is aiming to create the first ‘permanent equivalence’ regime outside of the Union. Awesome. But what does that mean?


Nations outside the Union can have the right to operate within the Union’s boundary if they are deemed to have achieved equivalence. Equivalence means that the ‘3rd country’, the outside party, has legislation and regulation deemed to be equivalent to EU rules and therefore not undermine the integrity and competitiveness of the bloc. However, as we were reminded of with Switzerland last year, equivalence can be ripped away from 3rd countries like the UK with virtually no warning. In some circumstances financial services are afforded a grace period of 30 days to sort their affairs out – a woefully insufficient period of time if you’re a hefty financial services provider who’s just been told their European client and product bases are now off limits.


The financial services sector is not only responsible for 7% of value added in the UK each year and just shy of 4% of the UK’s labour force, it is also a source of comparative, and in some cases absolute, advantage for the nation. That means the UK is strongly advantaged by trade in that service at the very least, and at most has a world-leading provision and efficiency in the service. The deliberately accidental leak that financial services are receiving explicit attention within the negotiations should reassure markets slightly. The news has offered little confidence to Sterling traders this morning as the Pound trades in line with its average value yesterday, just shy of a 2.5 month low for the Pound versus the US Dollar.


The lack of optimism in this phase of negotiations reflects the reality that just because a deeper trade deal than Johnson and Javid have espoused in recent weeks might actually be on the cards, it doesn’t mean the UK will be able to prise the deal from the mouth of EU negotiators. For example, developments in the political landscape of Ireland, a nation that joined the-now European Union at the same time as the United Kingdom, might cast doubt on the willingness of the EU Council to grant the UK a generous post-transition deal.




Discussion and Analysis by Charles Porter

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team discussion

Morning Brief – U.K.: Home of EVs?

U.K.: Home of EVs?


With PM Johnson setting out his stall for the U.K. to lead the world in manufacturing electric cars, it would look to be more of an aspirational vision than an actual one since the U.K. currently has a small fraction of the global EV market. However with decisive fiduciary action to encourage manufacturers to locate their EV plants in the U.K. plus a significant battery recycling capability, these could be game changers. The Congo is the leading cobalt producer by a mile ahead of Russia and Australia, but whatever the future of EVs may hold, the U.K. will need to import the component parts of batteries from abroad. So GBP in the post Brexit world is fundamental not just for domestic consumption of overseas goods but also a re-invented U.K. as competitive manufacturing nation on the doorstep of Europe. New Bank of England Governor Andrew Bailey had better swot up on his old currency management textbooks as it’s going to call for a different GBP currency management skill set than it has done in the past 20 years since the formation of the EUR.





Did you know? With 78,000 employees, revenues of GBP 7.8 Billion, 373 locations this (just) 50 year old Dublin headquartered subsidiary of British food company ABF has real product placement power:
many of our lady readers will be familiar with Mac’s famous and hugely popular lipstick, Velvet Teddy that retails at GBP 17.50. So what has Primark done? The answer is that they have launched a copycat version of Velvet Teddy and rather catchily(?) named it You do You, Babe. The difference is that it’s on offer at just GBP 2.50! Apparently You do You, Babe is flying off the shelves in the 10 European countries and the USA where Primark trades as Penney’s.



“Stop! This is the empire of death.”


No no this is not a piece about the Axis of Evil, it is what you are greeted with if you take in a visit below ground to the 200 miles of catecombs beneath Paris. Originally built in the 1600’s to cope with Paris’ overflowing cemeteries, the catecombs have more recently hosted movie screenings and illegal raves. For Eur 13 you can visit the final resting place of revolutionaries Robespierre and Jean Paul-Marat pretty much every day between 1000 and 2030. Woohoo….!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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St Mary Axe view

Morning Brief – US Election: Democrat Runners…28 down to 11…

US Election: Democrat Runners…28 down to 11…


Ahead of the key date of Super Tuesday March 3 2020 when 16 states are up for grabs in the primaries, some of our readers have questioned how best to categorise the Democrat challengers, so we have distilled the now 11 runners- 8 men and 3 women in to the following categories to save you time when you try to work out who has the best chance of success to represent the Democrat Party:


Minority: Pete Buttigieg, Andrew Yang, Tulsi Gabbard, Deval Patrick


Wildcard: Andrew Yang, Tom Steyer


Young Gun: Pete Buttigieg, Andrew Yang, Tulsi Gabbard


Progressive: Bernie Sanders, Elizabeth Warren, Andrew Yang, Tulsi Gabbard


Centrist: Joe Biden, Amy Klobuchar, Michael Bloomberg, Michael Bennett


The front runners are of course Bernie Sanders and Joe Biden simply because they are the best known, but with Michael Bloomberg and his billions in the race the big names have become almost the largest category. Following March 3 it should be clear(er) as to who is going to be the Democrat front runner candidate. Meanwhile Pete Buttigieg has upset the pundits-and Bernie Sanders- in Iowa. On paper Andrew Yang as a minority wild card young gun progressive would seem to cover most of the bases but the trouble is…..…who?!



UK Tax Deadline Day: 31 January


A record 10.4 million filed their returns electronically this year which is of course a reflection of a greater familiarity with the process. However to answer your unspoken question, more than 1 million taxpayers failed to meet the deadline. The penalty for late filing is levied 3 months afterwards at £10 a day or a maximum of £900 once the initial £100 late filing fee is levied ( a mere GBP 100 Million in the coffers of the Exchequer). But, if all of those 1 Million are still hovering over their mouse pads at the end of April, HMRC will hoover up a further GBP 900 Million on top of the many billions that the UK’s population pays on an annual basis in tax. Is it any wonder that “smiley” Sajid Javid, UK Chancellor of the Exchequer has a permanent grin on his face?!



The Legal Profession


With a daughter and a son in law as lawyers, I need to tread carefully, but some (not all) feel that the legal profession has a tough press. Melvin Belli, US lawyer and the King of Torts who went to the courtroom in the sky in 1996 aged 88 hardly helps the profession’s case with his best known quip:


“I’m not an ambulance chaser. I’m usually there before the ambulance.”




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Goodbye and good riddance!

Goodbye and good riddance!


If you hadn’t noticed, the United Kingdom has left the European Union. You could be forgiven for not having noticed because by design of the Withdrawal Agreement, nothing changes until the transition period is concluded. However, at the formal and legal level the departure has taken place: the UK’s flag has been ceremoniously removed from the European Council’s lobby; remainers have either found inner content, are now remourning or have become rejoiners. If nothing else yet Brexit has certainly developed the nation’s skill with the portmanteau… confined to the universe of ‘motel’ and ‘brunch’ we are no more! Although technically Grexit came first if you recall.


The final official words from the European Union to the UK as a member state might surprise you. Coming from the chair of an official meeting between member states a couple of days before the UK’s exit, the Croatian Ambassador (holding the 6-month rotating presidency) concluded the final engagement by fondly saying to the UK, ‘thank you, goodbye and good riddance’! The UK ambassador reportedly took the somewhat insulting conclusion of a 47 year long relationship in good spirits receiving reassurance the parting message was lost in translation and intended to mean good luck. Keep that excuse up your sleeve next time you’re caught whispering something under your breath perhaps!


Sterling tumbled to a six-week low versus the US Dollar yesterday as Johnson set out his position for trade deal negotiations. The Prime Minister called for a Canada-style trade deal to be constructed between the UK and the EU. The market was spooked by Johnson’s threat to walk away from negotiations if the EU insisted that the UK must be bound to the Union’s rules and concern built around what Johnson called an Australia-style trade deal. If you were wondering, Australia does not have a trade deal with the European Union. They have been in talks since May last year attempting to construct one and in the absence of progress on this endeavour they trade with each other based upon the 2008 EU-Australian Partnership Framework. This framework aims to boost trade by reducing technical barriers to trade but is fundamentally WTO trade with a touch of respect.


We should expect a tough line from Johnson at the start of negotiations in order to improve the prospect of the final trade deal. Nonetheless, the market braced yesterday and this morning by selling the Pound to react to unfolding events. Cable lost more than 2 cents yesterday from the price it opened at in Wellington, New Zealand to its close in London. The low we now sit on versus the Dollar is an important technical level. We have traded below this level at the end of November and subsequently touched this price floor four times in the two months of trading that followed. If this level is broken then ground opens up for the Pound to fall all the way to 1.20, the low reached in August 2019. Even if there is a retracement in the Pound in the short term, yesterday is a sign of the volatility to come during these negotiations.




Discussion and Analysis by Charles Porter

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Morning Brief – Aston Martin

Aston Martin


Phew. It really was last chance saloon for the iconic carmaker when Lawrence Stroll, the FI investor opened his wallet on Friday and hey presto a GBP 500 Billion bailout was secured. Lawrence Stroll made his money by being an early investor in brands such as Tommy Hilfiger, Michael Kors and Polo Ralph Lauren. Aston Martin is 106 years old so is not exactly in the category of an early stage company but is a brand and the hope is that it could be an equally big global brand-assuming of course that there are enough well heeled buyers.

The UK and Kuwaiti private equity groups that are nursing losses of more than GBP 3 Billion since the IPO post bailout will retain just over 50% but will clearly be hoping that with the Lawrence Stroll backing, Aston Martin will turn the corner and that the DBX, the AM take on the luxury SUV market, will be successful. The 4 litre V8 engine DBX is not likely to be on Greta Thunberg’s wishlist and starts with the entry level model at GBP 158,000 which is a bit more than the “basic” Bentley Benteyga and a lot less than the Rolls Royce Cullinane. Aston Martin will be hoping that the DBX’s similarity in exterior looks to the Jaguar SUV which costs about 20% of the price will be compensated for new DBX owners by the very plush interior that they will experience. Hmmm.



Dubai Real Estate


If you entered this market in 2014, look away now as you probably do not need reminding that property prices have fallen an average of 40% since then. In the past year rental yields have fallen 10% so not much help there and values have fallen 15%. So is it time to buy? Maybe but more likely not as the building boom shows no sign of slowing down which will further exacerbate over supply and likely cause a further fall in prices. But if you fancy it there is a 5 bedroom penthouse overlooking the Palm for sale: in 2014 it was offered optimistically it turns out at AED 17M or USD 4.6M. Now that same penthouse is on offer at AED 7M or USD 1.9M. As ever in Dubai it’s worth checking the small print; the service charges include an innocuous looking word: cooling. Those service charges come to AED 200K per annum or USD 54,500! One other thing: there is no beach access which is kind of fundamental for a seafront penthouse…..





Yesterday was the global pop star’s 43rd birthday. Surely not,I hear you say! Because she released her first album at the age of 13 in 1990 is why she seems to have been around for the last 30 years. Shakira is the product of a 20th century story: her grandparents were from Lebanon and emigrated to New York. Her parents moved from there to Colombia where Shakira grew up and forged her singing career. Shakira means grateful in Arabic, and her fans most certainly have reflected that by opening their hearts and their wallets with Shakira’s net worth now exceeding USD 300 Million.




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Hydrogen: it’s back and this time it’s different…and it’s green

Hydrogen: it’s back and this time it’s different…and it’s green


Older readers will recall the Zepellin, Hindenburg that unfortunately exploded on May 6 1937 in New Jersey killing 36 of the 97 passengers. Now hydrogen filled airships are making a come back as firstly they are green and secondly due to improvements in technology they can be manufactured to carry extremely heavy payloads (safely) and, most interestingly, more efficiently and more quickly than ocean going freight ships. Until now for instance large turbine blades for wind farms have to be shipped and then, in the case of on land wind farms, have to be transported by road to the sites. Now they can be flown from point to point by these large airships. Lockheed Martin have designed and built the LHM-1 which can carry 21 tons and 19 passengers. A UK company named Varialift is designing an airship capable of carrying 250 tons and another already has an airship with a payload of 60 tons. The figures for comparative transportation times are instructive: Washington DC to Lisbon: 6092kms and 11-13 days by sea or 4 days by airship. Tokyo to Los Angeles 9138 kms and 18-22 days by sea or 4 days by airship. With more than 10,000 windfarms due to be built globally, this is only one area of significant demand for this form of transport.



Stairway to Heaven


All this Zeppelin talk has made me unable to resist an excerpt from Led Zeppelin’s finest song: Stairway to Heaven(1971):
There’s a lady who’s sure all that glitters is gold
And she’s buying a stairway to heaven
All together now, and she’s buying a stairway to heaven
When she gets there she knows, if those stores are all closed
With a word she can get what she came for
All together now, with a word she can get what she came for
Ooh and it makes me wonder
(How does it affect you blokes?) Ooh and it makes us wonder
(That’s interesting that, yeah)
There’s a sign on the wall, but she wants to be sure
’cause you know words sometimes have two meanings
All together now, ’cause you know words sometimes have two meanings
(A lot of words have two meanings
Um, like in this song the word to buy
Buying a stairway to heaven……………….


Jimmy Page and Robert Plant have earned USD 560M from this song alone ….and still counting!



New Year resolution gym madness


Me to my trainer (proudly): “ Yesterday I did 200 sit ups”
Trainer to me (dismissively): “ Mike Tyson used to do 2,500 sit ups every day.”


Mike Tyson competed for 20 years, was the undisputed champion of the world, earned more than USD 300M and now at the age of 53 is worth USD3M having been declared bankrupt in 2003.
Bet he can still do more press ups than me though!


Nice weekend!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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