Daily Brief – UK Labour Government

UK Labour Government

Assuming that a new Labour Government comes into power on July 5 which is becoming daily more apparent, it is still even at this late stage hard to see how the new government will act in respect of the detail behind the platitudes that have been trotted out to date by the Labour leaders in waiting at the hustings. That is why it is instructive to take a look at the main points from the Mais Lecture that was delivered by prospective Chancellor Rachel Reeves on 19-03-24 at the Bayes Business School in the City of London. The content can be distilled down to Growth through Stability. This will be delivered due to firstly Securenomics-confidence through business feeling sufficiently secure which will encourage business risk taking and secondly by Investment through Partnership with Business. On the face of it, this sounds sensible and hard to argue with, assuming of course that there is money and investment available both domestically and internationally. What needs to be watched is what happens if growth is not achieved in say 12-18 months. Markets and investors are notoriously impatient and that could encourage less prudent behaviour. 

In which case the cry will go out to Buckle Up.

GBP/USD 1.2749

2064

That will be the first year in modern history that the global death rate will exceed the global birth rate. The replacement level or the number of children per mother to break even between death and birth rates is 2.1. In 1960 the rate stood at a productive 3.3. However in the more developed countries the rate has already fallen below the replacement level. Take the OECD countries for example where it stands at 1.5. Look forward only 75 years to 2100 and there will be only 6 countries that will be striking the replacement level: Chad, Niger and Somalia in Africa, Samoa and Tonga in the Pacific and Tajikistan in Central Asia. So it’s not only Japan that needs to be more productive as we wrote last week, it’s pretty much everywhere given the aging global population.

EUR/JPY 170.88

Gold

In case you have lost sight of what is happening with the gold price, after a run up to $2449 on the back of geopolitical uncertainty and fears of supply disruption, the price has drifted down towards $2300. Trading has been thin in recent weeks in part because gold as everyone knows is non yielding and alternative asset classes offer real yields and also it must be remembered because at these levels, the expense of buying gold rules out a lot of retail buyers. That leaves the professional traders to bat it around and this serves to remind everyone of the importance of retail to the gold market. Without as many Chinese and Indian buyers for example, the effect is sufficient to cap the price. And without those much expected US interest rate cuts, potential gold buyers prefer to hold USD.

Gold $2324.10 

Oil

In the same vein with respect to black gold or oil, the pushing back of those US interest rate cuts is contributing to the oil price going nowhere much. Plus of course the growing realisation that the Chinese economy is suffering with consumers being cautious as a result of the real estate falls as evidenced by what is a big event in the Chinese calendar these days: the mid year on line shopping festival. So last millennium to fly to Dubai for a shopping festival when one can slide one’s mouse across the mat and click on pretty much anything to buy without even having to leave home.

Brent $85.74

Stayin’ Alive

This day in 2018 Barry Gibb, bearded and tallest of the Beegees was knighted by the then Prince Charles at Buckingham Palace and paid tribute to his brothers who by then had all departed this world by saying that if it were not for them, he would not be at Buckingham Palace becoming Sir Barry. Vastly underrated, it is hard to think of a band that has written, performed and produced so many successful songs internationally for so long. Hats off to the perma tanned sole survivor of the Brit band the Beegees.

Well, you can tell by the way I use my walk
I’m a woman’s man, no time to talk
Music loud and women warm, I’ve been kicked around
Since I was born
And now it’s alright, it’s okay
And you may look the other way
We can try to understand
The New York Times’ effect on man

Whether you’re a brother or whether you’re a mother
You’re stayin’ alive, stayin’ alive
Feel the city breakin’ and everybody shakin’
And we’re stayin’ alive, stayin’ alive
Ah, ha, ha, ha, stayin’ alive, stayin’ alive
Ah, ha, ha, ha, stayin’ alive
Oh, when you walk

Well now, I get low and I get high
And if I can’t get either, I really try
Got the wings of Heaven on my shoes
I’m a dancin’ man and I just can’t lose
You know it’s alright, it’s okay
I’ll live to see another day
We can try to understand
The New York Times’ effect on man

Discussion and Analysis by Humphrey Percy, Chairman and Founder

Click Here to Subscribe to the SGM-FX Newsletter