The Heat Is On

Hello and welcome back. A yellow heat health alert has been triggered for most of England, including Birchstone’s sunny office in the City of London. Temperatures are expected to soar to 30 degrees in parts of the country – what happened to the 50 days of rain that was forecasted last month! I guess weather forecasts change as quickly as FX markets and this week the euro has started to regain some ground pushing GBPEUR back below 1.1800. With the French Election first round taking place this Sunday, we expect this retracement to be short-lived.

As it stands Macron is in a fight and faces an uphill battle convincing voters that his opponents will crash the economy.?French voters appear to trust the far right Rassemblement National more on the economy - the key question though is whether the markets do.? Here in the UK, we have very recent memories of what can happen when a party announces unfunded tax cuts and spending plans, so can be forgiven for our nervousness on the subject.?

If Marine Le Pen’s RN does take power, it presents a real risk event where the final outcome is a total unknown – as a result it should be given proper attention.?

With each day that passes it looks increasingly likely the outcome of the upcoming general election in the UK looks a dead cert.?The main headlines this morning talk about how the Tories have lost a third of their voters who had planned to vote for them since the start of the year.?The survey focussed on the same group of 16,000 people who were questioned at the end of January, asking them again last week.? It looks as if the main beneficiary in the shift has been Nigel Farage’s reform party who attracted 8% of the voters polled.? As it stands Labour looks likely to sweep to power on July 4th and all the current indications point towards the largest majority seen in British politics since the war.

Aside from the politics this week things are a little lighter on the data front.? Today the main highlight came from German Ifo survey which showed that business sentiment unexpectedly darkened in June.

The Ifo institute said its business climate index declined to 88.6 in June from 89.3 in May, compared with a reading of 89.7 forecast by analysts in a Reuters poll.

In the US, there is a large cloud of uncertainty in the air regarding the future direction on monetary policy in the US .?As it stands there are two cuts priced in for 2024 with markets currently pricing a 61% chance of the first cut taking place in September.?On Friday, the Fed’s preferred measure of inflation – (core PCE) is expected to show further progress is being made in the Fed’s fight on inflation.? Inflation is expected to fall back to 2.6% and could be enough to firm up bets that September is the right time for the Fed to start cutting rates.? However, with so much uncertainty, globally, is there an enticing alternative home for those dollars that will lead to a broader sell off? Good luck this week everyone.?

This weeks economic events to keep an eye on

Content Spotlight: What has driven the increase in spot prices?

Our latest report published with Drewry Shipping Consultants highlights the key factors influencing price including supply, demand, operational challenges and shipping behaviours.?

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Thank you for reading! We'll be back next week with another edition. This edition of Birchstone's Weekly View was written by Shaun Garrett .