Currency Exchange Rates Update…
June has been an excellent month for the Pound Sterling so far.
The Pound has risen to hit its highest level against the Euro since August 2022. That’s its highest level against the US Dollar since April 2022.
What’s In The News?
Interest rate differentials are currently dominating the currency exchange markets.
So far this month, US Federal Reserve (Fed) kept US interest rates stable for the first time since March 202. Ending a streak of ten consecutive rate increases. However, Fed Chair Jerome Powell indicated plans for additional rate hikes in 2023.The Fed next meets on 26 July.
The European Central Bank (ECB) chose to raise EU interest rates for the eighth month in a row. This time by another 0.25% to take its main rate to 3.5%, its highest level since 2001. The ECB President Christine Lagarde also signalled the strong possibility of, yet another rate rise at their next meeting due on 27 July.
This Thursday, 22 June is the turn of Andrew Bailey and his colleagues at the Bank of England (BoE) to make their next interest rate decision. Another increase, this time the consensus of opinion is for a 0.5% rise would take interest rates up to 5%, a level last experienced in April 2008. Some analysts now predicting that UK interest rates will touch 6% this year before levelling off. UK interest rates were last at 6% in February 2000. The BoE rate announcement is proceeded 24-hours earlier by the latest UK inflation data, out on 21 June.
The quandary for the BoE.
Whilst the headline rate of inflation has dipped from its 40-year high figure of 11.1% in October 2022 to 8.7% in April 2023, that is still way off the 2% rate the BoE is targeted with.
How Do You Beat Inflation Out Of An Economy?
By raising interest rates, raising the cost of borrowing, diminishing economic activity, and lowering prices (inflation).
The problem is getting the balance right because if you diminish economic activity too much, this leads to a recession.
Capital Economics amongst others are already suggesting the UK will slide into a recession in the second half of this year.
GDP grows by 0.2% as the economy continues to stagnate – The Spectator
Ahead of Wednesday’s inflation data. Ken Murphy, the boss of Tesco, the UK’s largest grocery chain said last week “there are encouraging early signs that inflation is starting to ease.” Shoppers have faced soaring food prices that saw food inflation touch 19.6%, its highest rate for more than 45 years.
Aside From Economics And Interest Rate Differentials, It’s Been Quite A Couple Of Weeks Politically In London, Edinburgh, Miami And Rome…
Former Prime Minister Boris Johnson would have faced a potential 90-day suspension from the House of Commons if he had not resigned. The Privileges Committee concluded he deliberately misled MPs over ‘partygate’.
Some were quick to point out the contrast between BoJo’s treatment and that of Margaret Ferrier. The former SNP and now independent MP who only got a 30-day suspension. She took a Covid test, should have isolated but instead visited a gym, a beauty salon and a gift shop. Then took a train from Scotland to London and spoke in a parliamentary debate. All before receiving a positive test result and then returned to Scotland by train!
Former Scottish First Minister Nicola Sturgeon was summoned to a police station, arrested then questioned as part of the inquiry into the Scottish National Party (SNP) finances.
Yet, whilst its well known that the financial markets hate political instability more than anything else, not only did the Pound not take a pounding but instead rose to a 10-month high against the Euro and a 14-month high against the Dollar!
For all the news coverage in London and Edinburgh, as Grant Shapps, the Secretary of State for Energy Security and Net Zero said, “the world has moved on” from Boris Johnson And Nicola Sturgeon.
US Federal prosecutors have filed 37 criminal charges against Donald Trump. Accusing the former president of illegally mishandling some of the US government’s most sensitive national security secrets.
And in Rome…
Silvio Berlusconi, the former Italian prime minister, died at the age of 86.
THE COSMOS OFFER
Of course, currency market volatility can bring trouble but with careful monitoring can also bring opportunity.
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This week’s quote is from the speaker and author Dr. Steve Maraboli
“Letting go means to come to the realization that some people are a part of your history, but not a part of your destiny”.