Daily Brief – British Pound

British Pound

With GBP if not all at sea but wallowing against the crashing waves of USD strength, it is a tale of two cities for beleaguered Brits: GBP/USD dipping below the previous floor of 1.2600 but versus EUR GBP still looking firm due to the apparent divergence between the Federal Reserve and the European Central Bank in the short /medium term on interest rate cuts. The EU economy is crying out for an adrenaline shot but is suffering from nagging inflation concerns while the US economy is doing rather well which means that US inflation at 2.1% can be dealt with by holding off on rate cuts without the pressure of the US economy needing a similar adrenaline shot. That means that GBP versus EUR looks good for Brits.

GBP/EUR 1.2112

US Dollar and Emerging Markets

With the fewer interest rate cuts in the USA picture becoming accepted, US Dollar jumped up as we wrote yesterday. Worth looking at the big moves in Emerging Market currencies in 2024: Korean Won down 12.4%, Philippine Peso down 6.5% and Indonesian Rupiah down 4.5% plus plenty of other examples. The result is that Central Banks across the Emerging Currency world have been scrambling to sell USD and put some support in place for their currencies against the mighty USD. For now it all looks a bit like King Canute and the rising tide: futile.

EUR/USD 1.0409

Anxiety and Tension

This is what Japan is exhibiting ahead of President Trump’s return to the White House in exactly one month. Historically over the past 70 years, Japan has tied both its economy and its security policy closely to the USA, but with the well signalled tariffs coming plus the tensions between the USA and China, Russia and North Korea, Japan is understandably anxious. The America First agenda of the incoming US Administration is unclear at this point but what it means will be of the greatest importance to Japan and its economy.

EUR/JPY 163.07

Swapping

Calm down dear! Nothing to do with currencies or something saucier still for this the season of goodwill. It’s about batteries. The idea is that instead of queuing up and then waiting while one’s EV wheels are charged, there is a scheme being tested in both China and the USA whereby battery swapping stations are placed in strategic locations which will allow motorists to pull in and remove and then replace their EV batteries. 5 minutes is what it takes, so similar to filling up and paying for petrol. OK it’s not exactly Formula One pit stop territory but it’s a start. Most likely this scheme being pioneered by Start Up Ample will resonate with operators of buses, taxis and Uber, Bolt and Lyft where being off road means not earning.

GBP/CHF 1.1302

You Can’t Always Get What You Want

Perhaps a useful tip with Christmas around the corner but in this case it was this day in 1969 that the Rolling Stones went to Number One on the UK Album Chart with Let it Bleed which featured this gem plus a whole lotta others.

I saw her today at the reception
A glass of wine in her hand
I knew she would meet her connection
At her feet was a foot-loose man
No, you can’t always get what you want
You can’t always get what you want
You can’t always get what you want
But if you try sometime, you’ll find
You get what you need

I saw her today at the reception
A glass of wine in her hand
I knew she was gonna meet her connection
At her feet was a foot-loose man

You can’t always get what you want
You can’t always get what you want
You can’t always get what you want
But if you try, sometimes
Well, you might find
You get what you need
Ah, yeah

Have A Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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