Your weekly economic update from the team at FXD Capital


M&A deals for the first quarter of 2021 totalled $1.3 trillion, the highest level since 1980. Dealmaking primarily came from acquisitions and SPAC mergers in the US. The latter has opened up a new area for public markets, with the nuances of merging with an already-listed blank cheque holding company enabling younger businesses to access public market financing with less scrutiny than a traditional IPO. The positive case for the record-breaking transaction numbers is that the economy is moving and optimism is high, with the downside being that owners and financiers see the market top and don’t want to see the door close before them.

Let’s take a detour to emerging markets. In recent years, Turkey has been trying to tame inflation and geopolitical concerns from its markets, which have resulted in a continual sell-off of its currency, the Lira. Ten days ago, President Erdogan sacked Turkey’s central bank governor, despite markets responding positively during his tenure, which has seen the base rate rise 8.75% since November 2020. Since the sacking, the Lira has fallen 14%, and the new central bank governor, Sahap Kavioglu, is of the philosophy that high-interest rates drive inflation. Turkey’s markets are volatile and with rapid changes of direction becoming the norm, expect this to continue.

At the other end of the scale, a sign of more relaxed conditions came from South Africa, which has held its central bank rate at 3.5%, despite the contagion from higher US rates seeping through into emerging market sentiment. South Africa spent 18.6% of public revenues on servicing debt last year, compared to the emerging market average of 9.9%.

Expect emerging market debt to be an exciting show to watch in 2021. With rates rising in the west, risk premia for emerging debt will inevitably rise and place pressures on already debt-laden governments. The only respite will come from any weakening to USD; if not, the double-effect of rising rates and a stronger dollar could prove problematic. Central banks in countries like South Africa may realise that they are not in charge of their destiny and are pieces in a more complex puzzle.

The successful release of the stranded Ever Given cargo ship in the Suez Canal brought respite to oil price spikes, with Brent and WTI falling by 2% and 1.1% upon the news happening. OPEC holds its monthly meeting this week, and output is not expected to rise, despite the unexpected turmoil in Egypt.


Economists across the board are revising 2021 economic forecasts regarding the growing momentum shown from UK figures released since the start of the year. Since October 2020, actual GDP figures have beaten figures predicted by Reuters’ sample panel (Refinitiv). Case in point: ONS figures for Q4 2020 released on Wednesday confirmed a 1.3% GDP expansion versus initial estimates of 1.1%. The print draws a line in the sand for 2020, a chapter that will come to be remembered as the worst GDP slump in 300 years.

The UK household savings ratio is now at a record high of 16.1% following Q4 2020 data releases. A combination of uncertainly and limited opportunities to spend have contributed to households being their most spend-thrifty since records began in 1963. What happens now is the intriguing part, will the shackles be released, or is this the beginning of a longer-term macro trend of household prudence? While hospitality and tourism spending will surge as their respective sectors reopen, I question how much of the foregone spending from over the lockdown periods will be released back into consumption.

Deliveroo’s damp IPO, which lost 26% of its opening value on its first day of trading, is noteworthy, more for its long-term ramifications. The knock-on effects for business and the economy of technology IPOs is the spillover into property, angel investing and local cache. Whether the experience of this dampens other London-based unicorns, like Wise, remains to be seen.


Non-farm payrolls data will print on Friday and are forecasted to rise by 628,000 in March, a significant jump from February’s figure of 379,000. After the months-long stimulus package saga draws to a close, attention now moves to President Biden’s $2 trillion infrastructure plan and what effects it will have on markets, rates and other economic factors.


Lockdown measures continue to escalate in Europe, with France recently shutting down schools and installing a 7 pm curfew for at least three weeks. In terms of data, the only noteworthy release this week was on the inflation front, with flash estimates of consumer prices rising by 1.3% in March. The print was in line with expectations but represented the fastest pace of growth since the pandemic began and closer to the ECB target of just under 2%

Have a great Easter



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.

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