Good morning, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
On the wires… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Quote of the day | |||||||||||||||||||||||||||||||||||||||||||||||||||||
“The smallest act of kindness is worth more than the grandest intention.” – Oscar Wilde | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The indicators | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Currency crackdown… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
A rejuvenated dollar caused a bit of a wobble in the market yesterday, although it is hardly running away with things. Renewed fighting between the US and Iran has encouraged the usual safe-haven demand, while rising oil prices have pushed US Treasury yields and inflation expectations higher. Last week’s softer-than-expected US inflation reading had given markets some confidence that the Fed could remain on the sidelines, but the latest energy-price surge has thrown another spanner into the works. The market is still leaning towards no change at next week’s Fed meeting, with this week’s PMI and housing data likely to determine whether the dollar’s recovery has any real legs.
Oil was the biggest story over the weekend, with Brent briefly climbing above $90 per barrel as the US and Iran exchanged further attacks and concerns grew over shipping through the Strait of Hormuz and the Red Sea. Prices remain close to one-month highs. Unfortunately, our hopes of cheaper petrol look to have been placed back in the cupboard for now.
Another story is that the UK have officially appointed their seventh prime minister in a decade, after Andy Burnham officially took office. The scale of his fiscal challenges are enormous and although the British government are borrowing less year-on-year, there is still a serious mountain to climb. Burnham re-committed to a pledge to stick to the fiscal rules followed by Starmer, but also said that there could be flexibility within them – Not sure what that means. The pound has slipped slightly in response, and this should continue to be an interesting space over the next few months.
Across the pond, the ECB meets on Thursday following its surprise 25-basis-point increase in June. Most market participants expect Christine Lagarde and co. to keep rates unchanged this time around, although the language accompanying the decision will be important. Europe is particularly vulnerable to another sustained rise in energy prices, meaning the ECB may want to keep the door open for a further hike in September. We also have local inflation and then interest rate decisions due this week, and so I expect the market to hold its breath until then. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
On the radar… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Did you know? | |||||||||||||||||||||||||||||||||||||||||||||||||||||
About half of all the bones in your body are located in your hands and feet. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
All the best,
Kyle Moulster
