Beyond Currency

"The UK economy continues to rebound as more young people receive the Covid-19 Vaccination. The delay in the full reopening has had very little effect on the economy, while the race between the Delta variant and the number of vaccinations, is being won by the jab.

British factories are now seeing their strongest growth in forty years, but shortages of key parts and materials are likely to see price increases that push inflation close to 4%.

Another impressive statistic from a CBI survey published recently is that the growth in output appears to be spread across all areas of manufacturing and industry.

Of course, this needs to be considered in light of the fact that manufacturing now only makes up around 20% of total economic activity."

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"There is little doubt that a belt tightening exercise is on its way as soon as the Bank of England considers the economy sufficiently strong to withstand an end to its recent free ride.

As furlough ends, those who find themselves without a job will see the Government’s main benefit begin to be cut back to pre-Covid levels.

Those who were unable to retain their jobs at the start of the pandemic, or whose employers were unable to access the furlough scheme, will find themselves as the worst hit, post-recovery.

It is expected that the Government will provide support for those who fall victim to the withdrawal of support, but it is expected that the unemployment rate will start to rise.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The UK has seen yet another political scandal claim the career of a Cabinet Member, as the Health Minister succumbed to evidence that he flouted social distancing measures while having an affair with a senior advisor.

It is ironic that of all the slurs aimed at Hancock by former Prime Ministerial advisor Dominic Cummings, that disregarding social distancing should finally strike home.

Hancock’s replacement would have been most people's choice. A seasoned Minister, Sajid Javid has held two senior Cabinet posts, and was ready to return to the fold.

It is unlikely that Javid will bring any new innovations to the role. He is committed to ending the Pandemic safely as soon as possible.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Bank of England’s Monetary Policy Committee met yesterday and in tune with other major economies, decided that stimulus remains more important than tackling rising inflation.

They left both the level of bond purchases and interest rates unchanged.

There is a concern that something is going to have to give.; Rising inflation could cut the nascent recovery in various economies off at the knees, but the feeling is that more stimulus will solve that issue.

The crystal ball viewers are finding it impossible to decide between inflation and growth as the most important driver for the global economy.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Concerns about rising inflation are clearly for another day, as the financial markets enjoyed a day when the data was nothing but encouraging.

Services output was a little lower than seen in May, but it was still well above the 60 level, and that means that the recovery is still in full flow.

The June flash estimate for services output was at 61.8. This is very positive given the 4:1 ratio of services output when compared to manufacturing.

There have been lingering concerns that employment issues in the services sector may catch up either this or next month, which could slow output. This hasn’t been the case so far but with the next time this data will be released, it will be following the first part of the withdrawal of furlough support, so we could see a dip.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The UK economy continues to rebound as more young people receive the Covid-19 Vaccination. The delay in the full reopening has had very little effect on the economy, while the race between the Delta variant and the number of vaccinations, is being won by the jab.

British factories are now seeing their strongest growth in forty years, but shortages of key parts and materials are likely to see price increases that push inflation close to 4%.

Another impressive statistic from a CBI survey published recently is that the growth in output appears to be spread across all areas of manufacturing and industry.

Of course, this needs to be considered in light of the fact that manufacturing now only makes up around 20% of total economic activity.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"No one really took a lot of notice of the oil price beginning to rise earlier in the year.

It was a sign that inflation was going to rise, as it has. We didn’t need a stick to beat the Central Bankers with, since they were telling us that inflation was on the rise. In fact, we got so excited that a higher oil price was a sure sign that the recovery was beginning, that a little inflation was not seen as a bad thing.

Now, analysts see inflation topping 4% later this year. Is that really going to be an issue?

Inflation at four per cent! Successive Chancellors in the eighties and nineties would have dreamed of that level of price rises.

Now, times have changed, and we live(d) in a low interest rate, low inflation world.

The three most prominent Central Banks, the Fed BoE and ECB, seem to be chasing each other to be the first to taper their bond purchases that are likely to be a prelude to a rise in short term interest rates.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"There is little doubt among members of the Bank of England’s Monetary Policy Committee that the Bank will be in a position to begin to taper the level of support being offered to the economy sooner rather than later.

Discussions concerning the fact that the Government is about to start to withdraw several support measures, including the Furlough Scheme, are taking place in the wider economy.

Members of the MPC, especially the outgoing Chief Economist Andrew Haldane remain bullish about the recovery. There will be some discussion at the meeting on Thursday about inflation and the pace at which the recovery can take place.

Chancellor Rishi Sunak appears to be among a cohort of Ministers that Prime Minister Boris Johnson can trust to make policy decisions that won't be challenged down the road by disgraced political advisors.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"UK inflation rose to 2.1% in May, breaking through the Bank of England’s 2% target.

While this was expected, it serves to remind those who believe that the Government should extend several of its support packages that the time is approaching when the economy will need to support itself.

The year-on-year data also exposes just how weak inflation was in May of last year. The country was reeling from the first lockdown as the brakes were slammed on.

This is the first time the Government’s inflation target has been exceeded in over two years.

Economists polled by Reuters expected a rise to 1.8%, but breaking 2% shows that the rate at which prices are rising is well above market expectations.

This points towards a more hawkish outcome from the next MPC meeting, although it is likely that, in line with the Fed and ECB, BoE Governor will try to squeeze as much benefit as he can from the Bank’s QE programme before the fun has to stop and reality returns.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

" Last evening, Prime Minister Boris Johnson announced the news that many had expected, and others had feared.

The complete removal of Covid-19 restrictions has been postponed until 21st July.

Johnson refused to commit 100% to that date, but said that prudence in the face of the virulence of the delta of Indian strain of the virus meant that as many as 10 million more people could receive vaccinations.

It is ironic that having been criticized for being slow to react to growing cases in the early days of the pandemic with delays in lockdown rumoured to have cost perhaps thousands of lives that a final, cautionary approach is attracting headlines like will we ever be free?

The economic recovery is unlikely to be set back too far, if at all, by the delay.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.