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May in the Markets

Trade sanctions and tariffs continue to dominate the global economy, but how effective are they in creating change?

Bank of England Reports Published in May 2019

Market Power and Monetary Policy – Read the report

This paper explores the link between monetary policy and market power measured by markups estimated at the firm level.

Official Demand for US Debt: Implications for US Real Rates – Read the report

An estimate on the structural term-structure model of US real rates, where arbitrageurs accommodate demand pressures exerted by domestic and foreign official investors.

Visual Summary – Inflation Report May 2019 – Read the report

A summary of the reasons behind interest rate decisions and how they can affect inflation.

Warning Over ‘New Eurozone Crisis’

From: The BBC

A senior adviser to the German government fears another European financial crisis could be on its way.

Slowdowns in the German economy and concerns about Italy facing another recession, combined with a reduction in Chinese demand are all worrying Dr Lars Feld, one of the German Council of Economic Experts.

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Despite the Rhetoric, Turkey Stops Buying Iranian Oil

From: Daily Forex

Turkey announced its decision to stop buying Iranian oil, despite previously saying they were unwilling to comply with the American demands.

Iranian oil exports are now at 500,000 barrels per day or lower and it’s still not clear which countries are buying those supplies.

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What if Mexico, Canada Join the US in the Trade War with China?

From: Daily FX

Progress in the US-China trade war has ground to a halt according to officials from both sides, which has rattled investor sentiment. Consequently, Mexico is now the United States’ top trading partner in goods according to US Census Bureau data.

Canada has an axe to grind and Mexico could look to make hay while the sun shines. While the likelihood that either Mexico or Canada directly engage in the trade war is minor, it is possible.

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US/China Trade Sanctions Will be Costly but Likely Ineffective

From: Reuters

Embargoes aren’t often effective in creating change in diplomatic behaviour because they create incentives to circumvent the blockade by switching trade, building indigenous capacity or changing technology.

Economic costs will be high, and there will be losers as well as winners, but supply chains will usually adjust.

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Interactive Graphic: How Investors Have Made Brexit Bets on Sterling

From: Reuters

Political uncertainty has loomed over the U.K. since Britain voted to leave the EU. But investors have been revealing their own Brexit fortunes by positioning bets on the strength — and weakness — of the pound.

At the moment Long positions represent bets that sterling will strengthen against the U.S. dollar, and short positions show bets that sterling will weaken.

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FX Rates in May

GBP/EUR

May GBP vs EUR Currency Fluctuations

May High: 1.1704
May Low: 1.1322
May End: 1.1322

GBP/USD

May GBP vs USD Currency Fluctuations

May High: 1.3120
May Low: 1.2607
May End: 1.2607

EUR/USD

May EUR vs USD Currency Fluctuations

May High: 1.1236
May Low: 1.113
May End: 1.113