Daily Brief – Bank of England

Bank of England

As widely expected, the Monetary Policy committee did cut interest rates to 4.75% yesterday but it is worth watching the predicted path of inflation currently at 1.7% which will rise to 2.2% in the next 3 months and which is not slated to fall back to within the 2% target range again until 2026. What that suggests is that it is most unlikely that there will be a further cut in December as had been hoped for/ expected depending on one’s degree of optimism. Quite a bit more wait and see-subtext especially as to the effects of Chancellor Reeves’ Maiden Budget- before further cuts and probably not until well into Q1 2025 at the earliest. And what that means is that GBP is underpinned at current levels and is likely to rise a bit from here when some of the post US Election USD froth wears off.

GBP/USD 1.2954

Germany

No confidence motions and fragmenting coalitions are not normally the preserve of Germany and have in recent times been seen rather more in the UK. However yesterday has shown that Germany is well up to it with the hurried appointment of a new Finance Minister following the dismissal of Christian Lindner and the resignations of the transport, education and health ministers with as a result the 3 way coalition  now being a 2 party coalition without a majority which means it is effectively unable to function. Chancellor Scholz is holding meetings with the Opposition CDU leader while asking for any No Confidence Vote not to be held until January 15 with a General  Election in March. Just a month ago Chancellor Scholz was enjoying top level international meetings with world leaders as part of the “Quad” but is now viewed as a dead man walking.

EUR/GBP 0.8317

Elon Musk

Rather a good week for EM: after putting what is for him chump change of USD 130 million as a bet on a Trump Presidency by supporting the President elect’s campaign, Elon Musk has had a bit of a win. The market cap of Tesla is USD 904 Billion; Elon Musk owns 20% or USD 180 Billion. So a 15% rise in Tesla shares in one day has netted Elon Musk a paper profit of USD 27 billion. And of course Elon Musk has earned himself a place as a close adviser to Donald Trump.

USD/JPY 153.55

Finfluencers

If this is a new term for you, you are not alone. This is what financial influencers are called and, in the UK, the Financial Conduct Authority is taking a close interest in the sector to prevent those influencers peddling variously, get rich quick schemes, cryptocurrencies, savings and investment products and other opaque financial products to the unwary. Mostly those finfluencers are social media personalities and it is reported that more than 20 have been summoned for interview to Stratford, London E20 which is of course the HQ of the FCA.

EUR/USD 1.0792

Stairway to Heaven

This day in 2021 Led Zeppelin notched up a 24X Platinum disc for this their bestest selling album Led Zeppelin lV which was awarded to them by the Recording Industry Association of America. Apart from being hugely commercially successful -and what that means is that they sold a staggering 37 million copies of the album. 

There’s a lady who’s sure all that glitters is gold

And she’s buying a stairway to Heaven

When she gets there she knows, if the stores are all closed
With a word she can get what she came for

Ooh, ooh, and she’s buying a stairway to Heaven

There’s a sign on the wall, but she wants to be sure
‘Cause you know sometimes words have two meanings

In a tree by the brook, there’s a songbird who sings
Sometimes all of our thoughts are misgiven

Ooh, it makes me wonder
Ooh, makes me wonder

There’s a feeling I get when I look to the West
And my spirit is crying for leaving

In my thoughts I have seen rings of smoke through the trees
And the voices of those who stand looking

Ooh, it makes me wonder
Ooh, really makes me wonder

And it’s whispered that soon if we all call the tune
Then the piper will lead us to reason

And a new day will dawn for those who stand long
And the forests will echo with laughter 

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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