Oil prices pulled back on profit-taking on Friday after settling more than 4 percent higher a day earlier, following a surprisingly huge drawdown in U.S. crude stocks as Gulf Coast imports slumped to a record low.

South Africa’s rand gave up earlier gains against the dollar on Thursday, with traders expecting it to trade sideways for some time as nervous investors kept an eye out on possible moves against Finance Minister Pravin Gordhan. Growth in South Africa’s two key sectors slowed on Thursday, with weak activity renewing fears South Africa may struggle to avoid recession and a downgrade of its debt to junk status by year’s end. South African Finance Minister Pravin Gordhan, who is facing an investigation by police that the opposition has called a “witch-hunt”, said on Thursday that whether he remained in office was up to President Jacob Zuma.

Nigeria’s Independent National Electoral Commission (INEC) has postponed elections in the southern state of Edo to Sept. 28 from Sept. 10 because of security threats, a government official said on Thursday.

What can I say. 2 incredible PMI numbers in the UK followed by a slightly disappointing Services number and the GBP gets knocked for 6. Down 150 points at one stage it just goes to show how volatile the GBP is not only to the upcoming Brexit negotiations but also to UK data. One could argue that the data will give the BoE reason to cut UK interest rates again to stimulate the economy. I do not agree. I think rates should stay at 0.25% and allow the economy and the currency to regularise itself. Already savers have been hit hard (not to mention mortgages) banks have cut saving rates and not passed on the rate cut to mortgage holders (excl tracker mortgages that follow the UK bank rates). I think (perhaps I am “talking my book”) once the panic selling has been extinguished we could see the GBP start to find some support and rally again. I just do not see any reason why the GBP was hit so hard. What could help is a Dovish member of the FED is giving a speech on Monday ( Lael Brainard) who has openly called for a delay in hiking rates. If she changes her stance then that could be a game changer and lead to a hike later this month. If she sticks to her guns then that will help those that are calling for a rate delay

Have a great weekend

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Oil prices erased early losses to trade higher on Wednesday, but gains were limited as market participants remained skeptical producers would reach an agreement to freeze output to rein in a global supply glut.

The ZAR rose as much as 2.5 percent against the dollar to its strongest in more than a week on Tuesday, buoyed by data that showed South Africa’s economy bounced back between April and June after a rocky first quarter. South Africa’s economy grew its most in six quarters between April and June as declines in the rand helped drive strong growth in mining and manufacturing, offering some breathing space to a government riven by internal tensions.

A long-awaited bill reforming Nigeria’s petroleum industry is effectively on hold until tensions ease in the restive Niger Delta region, the country’s oil hub, an influential senator said on Tuesday. Nigeria’s trade deficit narrowed in the second quarter boosted by a currency float in June lifting exports, the national bureau of statistics said on Tuesday, but the rise was not enough to help the economy avoid a recession.

Super Tuesday as the USD got somewhat of a hammering yesterday and continuing into this morning European open climbing above 1.34 (GBPUSD) and 1.12 (EURUSD). GBPEUR unfortunately has not enjoyed the same success and currently trading just above 1.19. I keep saying it, I think the FED will delay hiking rates later this month as data continues to “disappoint”. I do not feel there is any rush to hike rates and it would be in their interests to delay to December and hike 0.50% if data allows. Additionally we will know who is in the White House, Mr or Madam President. I know who I have my money on…the first Madam President to hold the highest office. It will be like coming back home!!

The USD was driven mainly by ISM non-manufacturing index which fell to 51.40 (vs expected 54.50). While the number is not something the FED will be shaking at, it still shows that the US economy is fragile and needs to be dealt with accordingly. There are a number of banks who still think the FED will raise rates in September..while I see their point I am basing my opinion on consistent data which in the words of the FED is dependent. You cannot have 1 month’s good 1 month average 1month bad and think that’s ok to give rise to a rate hike. There has to be consistency and right now I just don’t see it. If the FED do raise rates this month then they are thinking the data is acceptable regardless of being good bad or ugly. But is that sending the market the right message? After all they have said over and over again hiking rates is data dependent. Not to mention the issues facing China, the EU and the UK (Brexit). In other words the coming months and years will be fraught with difficulties and insecurities, so hiking rates now only to have to cut them later on will signal the FED had no evaluated the issues enough…

So as far as I am concerned its business as usual and the EUR and GBP (and other major currency pairs) should enjoy some respite until D-day and the will they won’t they hike day

Regards

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Crude prices extended gains on Tuesday, buoyed after top producers Russia and Saudi Arabia agreed to cooperate on stabilising the oil market, but a lack of immediate action to rein in output capped gains.

South Africa’s rand firmed against the dollar for a third straight session on Monday as U.S. interest rate fears receded and, although risks around domestic politics capped gains, it traded nearly 3 percent above last week’s one-month low. Members of South Africa’s ANC chanted slogans outside its headquarters on Monday demanding President Jacob Zuma step down in a rare public show of anger in the ruling party after its worst election performance since the end of apartheid in 1994. South Africa’s biggest platinum mine-workers’ union and the industry have failed to reach a deal on workers’ pay, the union said on Monday, raising the prospect of industrial action in the world’s top producer of the white metal.

Nigeria’s national oil company said on Monday there were no immediate plans to increase gasoline prices, days after fuel marketers and former NNPC management called for the removal of a cap on price levels.

The Kenyan shilling held steady against the dollar on Monday as demand from retail importers and manufacturers was seen being met by inflows from charities and the tourism sector.

Pretty quiet sideways trading yesterday as the market caught its breath for Labour Day. Following last Friday’s “disappointing” NFP number, traders have started to weigh up whether the FED will indeed raise US rates on 21^st Sept or wait until December (and raise by 0.50% as I am predicting). There has been no let up on Chinese growth, and the US made it very clear over the weekend that their priority is the EU bloc with the UK bringing up the rear. In other words all is not as well as the FED would have hoped. While the US continues to trade in or around 2.0-2.5% GDP the US labour market shows signs of fractures. There is no consistency to the growth rates and month by month the numbers fluctuate wildly. That says to me that there are still risks and corporates are not hiring as aggressively as the FED would have liked. While inflation is creeping up, the rise has more to do with external factors outside the US’s control. I continue to stick to my guns on this one and think the FED will delay hiking in 2 weeks and rather wait till December once the US elections are out the way and hit the market with a double shot raising rates 0.50%. That in itself will set the tone for the USD into 2017 and should give the US economy the boost by attracting investors looking for increased yield.

The GBP received yet another boost yesterday as Services PMI came in at 52.90 from 47.40 (yet another 5 point increase). The rise was the largest in over 10 years and again signaled the UK’s resilience to Brexit. Seems my calls last week for the GBP to rise towards 1.36-1.38 are now gathering momentum (short term). Again I must reiterate, the rise in the GBP must not be taken as a mark of things to come in the medium to long term as negotiations on Brexit have yet to begin. There has been an enormous amount of rhetoric over the past 72 hours regarding the UK’s standing amongst the US, EU, China and Australia. I can tell you one thing, the US and EU will not be handing out party bags to the UK when negotiations start. We will be lucky to get away with a piece of cake. Why on earth would the US, China and EU agree to the same terms of trade but restrict the free flow of workers. The points system as in Australia and as recommended by Johnson and Gove will simply not work. We are vastly different countries and our geographic location makes us attractive to the US and East in terms of access to East and west. No wonder every man women and child wants to come to the UK. Then there is that small issue of the UK being an island (like Manhattan) so there is only so much we can absorb before things get messy.

As for the coming week I still think the GBP will appreciate against both the USD and EUR as the UK data impresses and investors start to claw back short GBP positions.

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It was bound to happen. 2 big stories over the past 72 hours: (1) US NFP on Friday disappointed printing +151k vs +180k expected and +255k July and (2) the US, China and Japan have all made credible “threats” about the UK’s position (vis a vis trading) following the Brexit vote.

• So all is NOT as it appears. Seems my comments last week have now come to fruition and the FED will have some serious debating ahead of their meeting on 21^st NFP came in at a mere +151k leaving the FED scratching their heads and thinking if US rate hikes are indeed “data dependent” then on that data alone they will have to delay hiking rates. I have said this many times, I truly believe the FED MUST delay hiking at the forthcoming meeting and allow more time for the US economy to regularize and normalise (not to mention the US elections) before hiking. It is for this reason I believe the FED must and should delay hiking rates until the 14^th December at which point the FED will have another 3 data points to reflect and act upon, and also know who the new commander and chief is come January 2017. If the economy does indeed show signs of stabilisation over the coming months I will be looking for a 0.50% hike rather than 0.25% which most people think. By hiking 0.50% they are able to hike to their desired 1% by year end and in so doing provide a boost to global stocks (good for pensions and investors) and give the USD the platform to rally towards PARITY vs the EUR going into 2017.

• Finally some negative consequences to Brexit. President Obama kicked things off by saying the UK would not be the priority for a USD trade deal (i.e., please join the back of the queue) which was then followed by Japan who issues an unprecedented 15 page warning about the consequences of Brexit. The icing on the cake came from China and tensions boiled over regarding their involvement in UK nuclear power.

Let’s start with the USA. Well let’s be honest the US would rather deal with 500 mio (EU) than with 65mio (UK) people. That would simply mean the UK will have to wait until the US has concluded their agreements with the former bloc before considering throwing the scraps to the UK. Business is business and I am afraid those 17.4mio people that voted leave should have considered their future more wisely.

Even before the dust had settled Japan threw their curveball stating that a full exit from the EU will probably lead to corporate exits form the UK unless the current financial privileges are maintained in full. Half of Japans investments in the EU comes to the UK with the likes of Nissan, Honda, Mitsubishi, Nomura, Daiwa and MUFG employing tens of thousands of people. If these corporations made good on their threat and left to the EU the void would be catastrophic for the UK economy. I wonder how many of those employees voted to leave. Some sleepless nights ahead I am sure. The Japanese report conclude “Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to continental Europe if EU laws cease to be applicable in the UK after its withdrawal. In light of the fact that a number of Japanese businesses, invited by the government in some cases, have invested actively to the UK, which was seen to be a gateway to Europe, and have established value-chains across Europe, we strongly request that the UK will consider this fact seriously and respond in a responsible manner to minimise any harmful effects on these businesses.”

And finally China…PM May is said to have angered the hosts (and the French) by placing the Hinkley point nuclear project under review. The reason, security concerns over Beijing’s involvement. It would appear that the PM is looking to speak to other world leaders and see what they have to offer before committing to the Chinese/French deal. The PM was hoping the Chinese would take a passive investment rather than a full partner active one.

Now you probably think I am a little over the top here but something strange happened during the referendum. For weeks leading the 23^rd, there was one person who was visibly absent from the podium. Yes you guessed it, MS May.  She was nowhere to be seen and not a peep to add. Which got me thinking. Is the PM a LEAVE voter!! I would think YES. Given ex PM Cameron already had Ian Duncan Smith, Boris and Gove to content with (not to mention a Labour party that didn’t care) I honestly think Mr Cameron made some agreement with Ms May to “disappear” during the run in to the referendum in return for the TOP JOB once he quit in 2020 (assuming remain won). It is for this reason that I think my conspiracy theory was right given that the turnaround between Cameron leaving and May coming in was well lightning fast. Something very fishy is going on.

As for the GBP this week, I said this last week. Despite the doom and gloom above I continue to think the GBP could drive higher to 1.36-1.38 at least. Sentiment continues to shine given we have not started Brexiting just yet.

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Crude prices rose on Friday after losses of more than 3 percent a day earlier, with investors treading cautiously ahead of key U.S. employment data that will help gauge the health of the world’s largest economy and oil consumer.

South Africa’s rand recouped some of its previous session’s losses on Thursday, while stocks closed slightly lower led by a weaker financial.

Nigeria raised 212.85 billion naira ($654.92 million) in an auction of treasury bills on Wednesday, with yields little changed from previous sales, data from the Debt Management Office showed on Thursday. Meanwhile the NGN has hit yet another year low at 424 as the CBN continues to make it very expensive for importers and companies/individuals looking to buy foreign currency. No end in sight to this recent devaluation.

Let me start by saying I did not have prior knowledge of the UK manufacturing PMI that was published yesterday. You saw in my comments yesterday I said I thought the GBP would trade through 1.3200 (at the time GBPUSD 1.3130) and trade through it did. When the PMI was published the GBP rose 0.98% to trade at 1.3260. Then towards the European close the GBP actually broke 1.33 at one point before profit taking brought us back to 1.3270 where the market is currently trading. Now let’s not get ahead of ourselves. Yes August was a super month and not since March 2009 has the PMI jumped by 5 points month/month. Brexit was done and businesses knew they simply had to get used to the fact. However and this is a big HOWEVER Brexit has not started. It is like commissioning to build a super yacht but you have not seen the prints on what it looks like. It could be the Pelorus or a Dinghy.

In other words we have not started negotiating our exit so how on earth do we know what the terms or financial fall-out will be. So yes as things stand its business as usual but that I can assure will change massively once the interested parties sit down and negotiate the terms of our exit. Therefore it is only then that we will know just how bad (or good) Brexit is going to be for the UK economy. I can assure you one thing, it will not be easy sailing and I have a feeling the EU are going to play hardball. Why would they give us the same advantages being a member as those as a non-member. Just ask the Canadians. It will get very very ugly.

For now and at least till 1.30pm when the US publishes NFP the GBP will trade sideways awaiting the number that could quite possibly set the tone for the USD for the next few months. Expecting +180k a number well above +200K will set the USD on fire as traders and economists will be thinking that was the last piece of the puzzle that the FED were looking for to raise rates on the 21^st Sept.  I still think they should hold back until after the US elections and rather (if the numbers match up) hike 0.50% on 14^th Dec. That would be the best of both worlds.

Have a great weekend

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Not much movement on currencies as we await NFP numbers tomorrow. Basically what I wrote yesterday continues to dominate the FX markets with traders and investors happy to “take a breather” ahead of tomorrow’s announcement.

The GBP weakened at one point below 1.31 handle but managed to find the bottom and rally back through 1.3100 towards the close in NY last night and continued the rally into the European open.  Investors and traders need clarity tomorrow before embarking on the next USD move following Pres. Yellens comments at Jackson Hole last Friday. What is “expected” (within reason) is a strong reading tomorrow will boost the USD’s chances for the coming months as financiers look to the FED to raise US rates (September and December). However having said that, I am not alone when I say I think the FED should delay hiking in September and give the US and global economies more time to regularise and stabilise. Merrill Lynch/BOA, DB, and a number of other well-known institutions have all commented recently that it is still too early to raise rates in September. What worries me and I am sure many other investors is if Mr Trump wins in November. You see as things stand we simply do not know what his economic and foreign policies are and this will create a degree of uncertainty which leads to investors potentially dumping US stocks and the USD. Mr Trump has built his business on debt. Borrow build and spend. Will he run the US economy the same way? Even his comments recently on the US’s ability to use nuclear weapons worries me. Of course saying and doing are 2 very different things but do you really want to second guess what he will do.

As far as Ms Clinton is concerned, the whole email fiasco is hot air. So what if she used her private email to communicate with people. It is not like she gave away state secrets. Mr Trump and his advisors are trying everything they can to show Ms Clinton as an untrustworthy and dangerous leader. I totally disagree, I think Ms Clinton would be an outstanding President. She has been in DC/NY for most of her working life and knows how the US “ticks”. She is likeable and more importantly the US needs some fresh blood. She has a clear foreign, domestic and economic policy which will boost US assets and more importantly the US economy. For this reason I think if Ms Clinton wins investors will pile into US assets and the USD and this will make the decision by the FED to raise rates in December a formality. In fact why not increase rates by 0.50% (in December) and that way the FED gets to kill 2 birds with one stone (delaying hiking in September vs hiking double in December). That is what I think SHOULD happen and I hope I am right.

As far as the GBP is concerned (and the EUR) vs USD (and crosses) – as per above I think traders alike will be sitting on the hands and trading sideways as they await tomorrows NFP numbers. If anything I think the GBP will trade better today and potentially test 1.32 handle. This will see GBPEUR hopefully climb towards 1.1900. I think if the FED do delay hiking in 3 weeks the GBP will bolt higher as a consequence. In fact I wonder if traders are positioning for just this regardless of tomorrow’s number. Time will tell and tomorrow at 1.30pm we will finally know where we stand.

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Crude oil futures fell in early trade on Wednesday as the U.S. dollar held around three-week highs and industry stocks data indicated a build in U.S. crude inventories.

South Africa’s rand weakened against the dollar on Tuesday, with investor caution over a political row involving the country’s finance minister hanging over the markets.

Nigeria’s central bank sold around $1.5 million at the interbank forex market on Tuesday to support the local currency and ensure the closing rate settles after a torrid week. A militant group said on Tuesday it attacked a pipeline operated by a subsidiary of Nigeria’s state oil company in the country’s southern Delta region, just a day after the most prolific rebel group in the restive energy hub said it had halted hostilities.

Kenyan shilling was stable against the dollar on Tuesday with demand coming from importers and manufacturers expected to put pressure on it, traders said.

All quiet on the Western front. Investors and traders sit on the sidelines trading in a range as we await quite possibly one of this year’s most eagerly awaited NFP report due Friday. The report will rubber stamp the FED’s decision whether to hike rates in September or not. FED Vice Chairman Stanley Fischer noted yesterday that the pace of future FED rate increases will depend entirely on the economy’s performance (seems the FED are changing their stance slightly in that they earlier indicated rate hikes are not only US data dependent but also dependent on China, the EU and Brexit fallout). Fischer also said the U.S. economy appears to be on a 2% growth pace and heading toward full employment, and said the strength of the dollar wasn’t an issue for now. Fisher further hinted if Friday’s payrolls report is reasonably in line with expectations, it could clear the way for one, or possibly two, Fed rate hikes by the end of the year.

For this reason as I have noted above Friday’s NFP number is a real GAME CHANGER. IF the number is strong (250k+) the FED will probably hike rates in September and in turn set about changing the course of the USD for the coming months. A rate hike in December is then a formality one should think unless of course there is a Republican President in office in November. Make no mistake, should “the Donald” win the election in November it will set about all sorts of mayhem in the financial markets as we await his economic policies. The fear of the unknown is giving traders some serious food for thought and has led to investors pulling billions of USD from funds. While some people might not agree or like Ms Clinton, truth is she is the safer bet. Look at what happened to the UK on the 23^rd June, we all thought people would never vote to leave given the fear of the unknown. Well how wrong we all were. The US elections will be no different, anything is possible.

As far as the UK and the GBP is concerned, PM May is meeting her MP’s at Checkers today to discuss Brexit and the consequences and more importantly when to invoke Article 50. However that appears to be heading for the Supreme Court as a group of individuals want Parliament to vote on Brexit and Article 50. Rocky times ahead for the GBP I have to say. Still I am hopeful things will stay the same for the next few years as negotiations take place and we have a template for the UK outside the EU.

I AM VERY WORRIED!!!

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Oil futures edged up on Tuesday as the U.S. dollar erased earlier gains, but doubts that producers would be able to agree to an output freeze continued to drag on prices.

South Africa’s rand weakened against the dollar on Monday as the greenback rose on expectations that U.S. interest rates would rise soon, adding pressure on the currency which has been knocked by concerns over the finance minister’s future.

Nigeria’s currency market registered $327 million worth of trades on Monday, about six times more than its usual volume, the market regulator told Reuters. A Nigerian militant group, which has claimed responsibility for a series of attacks on oil and gas facilities in the southern Niger Delta energy hub in the last few months, said on Monday that it had halted hostilities.

Kenya’s shilling was steady on Monday and traders said it was seen weakening due to anticipated dollar demand from sectors like energy.

Very interesting comments indeed by Pres. Yellen of the FED on Friday at Jackson Hole. Her sheer confidence was exceptional (we know she wants to hike rates sooner rather than later) despite the calls by her fellow members to wait. Yellen noted “in light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months”. What seemed to be missing though were he concerns about the global economy namely, the sustainability of US labour market, Chinese growth and the fallout from Brexit. I have agreed with the FED members who have called for just 1 rate hike (to come) in December. Yellen appears to be calling for September and December. I think this Friday’s NFP report will be that much more important as it will indicate just how healthy the US labour market is following July’s +287k and August +255k. Anything in that region will probably sway the FED to raise rates on the 21^st September and then again 14^th December (assuming the labour market continues to shine). What does surprise me is Yellen appears to be going it alone and not worrying about external shocks from the slowdown in China and the yet to be determined fallout from Brexit. Truth is no one quite knows how things will turn out once the negotiations start on Brexit. What we do know is local companies that are importing have hiked their prices following the collapse in GBP. An article in the FT has confirmed this as companies pass on the increased costs (of importing) to their customers. Exporters on the other hand have had a field day and one can only surmise that the current account will balance up via higher receipts for exporter’s vs higher costs for importers.

The USD did what we expected following Yellen’s comments and rose vs the EUR (trading sub 1.12 now) and GBP (sub 1.31) – GBPEUR remains range bound 0.85/0.87 (1.1500/1.1765). PM May has summoned her MP’s and told them to embrace Brexit and accept that the people have spoken. Labour’s candidate Owen Smith has recently commented that should he win he will push for another referendum. He also stated that Corbyn’s total lack of care during the referendum was because (behind the scenes) he wanted Brexit and probably voted Leave. No wonder he was not passionate like Blair and Brown and Darling calling for a Remain vote by labour supporters. While I am clearly a Conservative, if Corbyn stays Labour’s leader it is quite possible UKIP and Lib Dems could become the new opposition party in parliament. Not a bad thing then if you are a Conservative …

So for the rest of the week….EUR/USD and GBP/USD likely to trade southbound. In other words, USD maintains the “upper hand” ahead of NFP on Friday.

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Headlines:

Oil prices dipped in early trading on Friday after the Saudi energy minister tempered expectations of strong market intervention by producers during talks next month.

South Africa’s rand weakened further to a one-month low on Thursday, weighed down by lingering uncertainty over whether the finance minister faces arrest.

Nigeria’s naira was quoted at an all-time low of 409 to the dollar on the black market on Thursday, compared with 402 the previous day, after the suspension of some banks from forex trading made dollars even harder to obtain.

Kenya’s central bank pumped dollars into the market early on Thursday, helping to lift the shilling, after it weakened on the back of President Uhuru Kenyatta’s decision to approve a law capping commercial lending rates, traders said.

All eyes on today’s Jackson Hole meeting where Pres. Yellen of the FED will speak to global Central Bankers. I imagine she will reiterate the importance of stable markets and maintain their vision for a global economy pre 2008. In other words she will probably make some mention about US rates and whether they are going to rise or remain static in September. Of course as a Central Banker and amongst Central Bankers, the rhetoric will be coded by the NSA (that’s the National Space Agency not the Security Agency) because that’s how these bankers like to talk to each other. Then you have the traders, strategists and economists who will then try to make heads or tails and trade against that. So really tonight is very important indeed as far as US interest rates are concerned and will dictate the next direction for the USD (and GBP as a result). The FED futures market is currently pricing in a 57% possibility that the FED will hike rates in December. September currently sits at around 30%…

The GBP as a result has traded strongly (if you can call a 1.32 handle strongly) over the past few days ahead of tonight’s talk. We have in the past few moments dipped below 1.32 handle but its negligible. I think if there is a delay in hiking in September this could and should push the GBP up a big figure and then see what happens. I know I am going against the tide, but something tells me the GBP is due a BIGGER correction.

Have a great (long) weekend

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Let’s start with some headlines:

Oil prices fell over 1 percent on Tuesday, with Goldman Sachs warning that August’s price rally had been overdone and that a proposed oil production freeze at current near-record levels would not help rein in an oversupplied market.

South Africa’s rand continued its retreat against a strengthening dollar on Monday, as rekindled expectations of a near-term rate rise kept investors cautious.

Nigeria’s naira closed firmer on the interbank market on Monday after the central bank sold dollars to some commercial lenders towards the end of a session that featured no trades in the first four hours, traders said. Nigerian President Muhammadu Buhari will ask parliament for extra powers for one year allowing him to take “emergency” decisions to revive the flagging economy, a government source said on Monday. Hotel and gaming group Sun International has become the latest South African business to pull out of Nigeria because of weak economic growth and clashes with regulators and shareholders in the West African country.

The USD continues to retreat today as speculation gathers steam that this Friday’s talk by Pres. Yellen at Jackson Hole will kinda confirm that there is indeed an increasing likelihood that the FED could delay hiking rates in September. I wrote about this subject in detail yesterday and while I think the FED should delay hiking rates, their actions will be vastly different (in how they analyze the US economy and the fallout from a further rate hike). We know there are FED members who want to delay a rate hike, but I think Pres. Yellen is keen to hike rates and get a move on with the US economy. She is determined to hike rates because she feels the US economy will be better off with higher rates. That way if they do encounter a rough patch they will have scope to cut rates should there be a need. Granted another 0.25% hike will be neither here nor there, but it is the global economy that you need to consider strongly. The UK has shed 2% of GDP since Brexit, the EU is well the EU and nothing changes (though we did see stronger French and German PMI numbers this morning which is encouraging) and finally China is on her knees (if you can call GDP at 6.80% on her knees). So you see when the FED decide on whether to hike or not in September best they read my comments above and know it is too soon.

The GBP has had a super 48 hours rallying above 1.32 at one point this morning. This is NOT a GBP thing it’s a USD thing. The EURUSD continues to trade over 1.13 handle all because of the will they won’t they hike rates in September. I wrote yesterday that I think there is good reason for the GBPUSD to rally potentially as high as 1.40 given that things have not necessarily been “that bad”. What we have to look at are the BoE gilt issuance and the value of the GBP makes a big difference not only to the value of the bond but also the repayments. With Inflation at 0.60% and prices rising heck, what is stopping inflation hitting 1% by year end and potentially a UK RATE HIKE!!! Anything is possible and my gut tells me something is brewing in GBP land. A delay in September by the FED to hike rates could be the strike that sends the GBP back to more “respectable” levels. Anyway that’s my opinion

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Any financial promotion contained herein has been issued and approved by ParityFX Plc (“ParityFX”); a firm authorised and regulated by the Financial Conduct Authority (“FCA”) as a Payment Services Institution with registration number 606416.  It is for informational purposes and is not an official confirmation of terms.  It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to.

Opinions expressed are subject to change without notice and may differ or be contrary to the opinions or recommendations of ParityFX. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, ParityFX does not accept any liability arising from the use of this communication.

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