Your weekly economic update from the team at FXD Capital


The European Central Bank pledged commitment to further monetary stimulus, intending to shepherd inflation “durably” towards its new framework of a pegged 2% target. However, the new strategy leads to the possibility of inflation running hot and exceeding the target while the body monitors ongoing conditions. So, inflation in the eurozone – sounds like a mirage, right?

For several months now, it has seemed like the eurozone is sitting comfortably under shelter while the UK and US face the elements of escalating inflation. Indeed, with consumer prices rising 1.9% in June and ECB inflation predictions coming in at a miserly 1.5% for 2022 and 2023 – the question is more so whether more stimulus arrives before the discussion turns to cutbacks?

ECB president Christine Lagarde stressed the importance of consensus between ECB members, a situation that did not materialise in this month’s pledge. The eurozone is notorious for being a different maelstrom of economies running hot and cold simultaneously, forever placing the ECB as a mediator looking for policy compromise, over leading from the front foot.

As vaccine rates start to catch up in Europe, economies open, and the southern part of the continent welcomes a relatively “normal” tourism season; it will be intriguing to see where prices stand come September. Already discussions point towards the Delta variant further kicking the can down the road of normalcy resuming, so it’s reasonable to think that inflation will now taper off as summer winds down.

The continual persistence of coronavirus mutant variants resulted in stocks taking a hit this week. As a result, European bourses saw their worst session of the year on Monday. With fear trumping inflation, commodities also took a bath and investors headed for the relative safety of US Treasuries.

Incidentally, the 10-year note is at its lowest rate in six months. It seems not that long ago that everyone was predicting runaway inflation? USD is also at its highest level (on an indexed basis) since April in anticipation of rate hikes coming sooner; as in, investors are loading up to pre-empt a carry trade. The spectre of rate hikes in the US hangs over emerging market nations; higher rates and a stronger dollar could start a domino effect of emerging market defaults.

Vaccines were seen as the golden panacea last year, and while they indeed are working (scientifically), the short term euphoria brought to financial markets is ebbing away. As some may remember, the world’s economy was on shaky ground at the end of 2019, and those fundamentals remain, despite 2020’s unique detour.

Oil prices plunged 7% on Monday after OPEC released the shackles on supply and agreed to add another 400,000 barrels into circulation between August and December. In addition, oil inventories are rising in the States, which may be another one of those foreboding signs of overheating. Finally, oil was another big story as part of the reflation trade, which has quickly dissipated over the past couple of months.


Retail sales rose 0.5% (+0.1% on consensus) between May and June, bolstered by Euro 2020’s effect on food and drink demand. The news also corresponds with increased consumer confidence figures, which all fits in with the exuberant view of pent up demand being unshackled.

June was the busiest month ever for Britain’s property market, with buyers racing to complete purchases before the full stamp duty holiday ended. As a result, sales were up 219% on June 2020’s figures and returned a 10% increase in valuations.

I am still waiting to hear a coherent argument for the broader benefit of stamp duty holidays on an economy. Aside from a benevolent tax cut, I struggle to see how such moves help increase the velocity of money and stimulate recurring business transactions.


New claims for unemployment benefits rose unexpectedly last week from record lows. Despite labour markets appearing buoyant and it described as a job-seekers market, jobless claims rose 51,000 to 419,000, despite predictions of a drop to 350,000. Data shows increases within the gig/self-employed economy, which may corroborate the claims that the surge in job numbers recently has been from the service sector flexing up back to full capacity, while underneath it, nothing else has changed.

Bank operating costs rose 10% YoY in Q2, a dramatic situation considering the anticipated savings from less travel and entertainment. The rise was due to investment in technology and talent, two words which are very much the ongoing war in finance right now. It also represents a more attack-minded approach from an industry that licked its wounds after the last recession.

With banks continually under pressure from compressed interest rate margins, the necessity of pivoting towards advisory or “economy-agnostic” fee structures becomes greater. Investment in technology and talent is an arms race to unlock such opportunities, and in the UK, in particular, the retail overtures from Goldman Sachs and JPMorgan must sound ominous for the incumbents.

All the best for the week ahead



Our weekly column is written by Alex Graham, Economic Advisor to FXD Capital. Originally a bank treasurer, Alex’s weekly roundup intends to provide a conversational, top-down view of what is going on in world macroeconomics and how it impacts business on the ground level.

Would you like to receive FXD Capital’s Insights directly to your mail inbox? Click the button to subscribe to our email newsletters.

Subscribe to our weekly economic update


This document should be considered a marketing communication for the purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.  The information given in this document is for information purposes only and is not a solicitation, or an offer to buy or sell any security or any other investment or banking product. It does not constitute investment, legal, accounting or tax advice, or a representation that any investment or service is suitable or appropriate to your individual circumstances.

You should seek professional advice before making any investment decision. The value of investments and the income from them can fall as well as rise. An investor may not get back the amount of money invested. Past performance is not a reliable indicator of future results. Investment returns may increase or decrease as a result of currency fluctuations.

The facts and opinions expressed are those of the author of the document, as of the date of writing and are liable to change without notice. We do not make any representations as to the accuracy or completeness of the material and do not accept liability for any loss arising from the use hereof. We are under no obligation to ensure that updates to the document are brought to the attention of any recipient of this material. Please note that this commentary may not be reproduced, distributed, disseminated, broadcasted, sold, published or circulated without prior consent from FXD Capital Limited.

FXD Capital Limited is registered in England & Wales (No. 11397216) with its registered office at 3 Lloyds Avenue, London, EC3N 3DS. FXD Markets Limited is registered in England & Wales (No. 11876665). FXD Markets is an FCA registered trading name of Kyte Broking Limited. Kyte Broking Limited registered in England & Wales (No. 02781314) is authorised and regulated by the Financial Conduct Authority (“FCA”) under FRN: 174863 with its registered office at 55 Baker Street, London, W1U 8EW. Kyte Broking Limited is a member of the National Futures Association (“NFA”) under NFA ID: 0288293.