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  • Posted on 3rd August 2022 in the categories: Market Update

    Market Update



    The latest Bank of England (BoE) monetary policy decision will be announced on Thursday. The markets are currently undecided if the Bank Rate will be raised by 25 or 50 basis points. This is from its current level of 1.25%. Most analysts expect the BOE to raise rates by 50 basis points. However, there’s growing speculation that the central bank may only raise rates by 25 basis points. This is in an effort to shield the economy.

    At the last meeting, six out of the nine MPC members voted for a 25 bp hike. While the other three called for a larger, 50 bp increase. In the May MPC report, inflation was seen hitting double figures in Q4 2022 before falling. The labour market was expected to tighten further, while growth was seen slipping lower. The BoE will need to factor in these hard data, consider the amount of imported inflation via a weak Sterling complex, and make a choice. A 50-basis point rate hike would send a strong message to the market. A 25 basis-point increase “could trigger some weakness in the pound,” they wrote, adding that the currency may dip to $1.20 or 83 cents against euro.

    NG Groep NV analysts including Francesco Pesole said limited tightening from the BOE could sting the pound given that the Federal Reserve and other central banks have been raising rates more aggressively. The currency has rebounded in the past two weeks, climbing above $1.22 after months of relentless selling.

    Source – Daily FX & Bloomberg UK

    UK Leadership Contest

    The ongoing leadership contest for the keys to No. 10 Downing Street currently shows Liz Truss as the favourite to be the next Conservative Leader and Prime Minister. Ms. Truss has recently taken a few shots at the BoE, suggesting that she would, if elected, look at a review of the central bank’s policy remit to make sure that it is being tough enough on inflation. The Bank of England has been independent of government control since 1997.

    Source – Daily FX & Bloomberg UK


    China’s factory activity unexpectedly contracted in July while property sales continued to shrink. Therefore, highlighting the fragility of the economy’s recovery amid sporadic Covid outbreaks. This adds to calls for more policy stimulus to fuel growth.

    The official manufacturing purchasing managers index fell to 49 from 50.2 in June. The National Bureau of Statistics said Sunday, dropping below the 50-mark that indicates a contraction in activity. A private survey on Monday also showed a weakening in factory production. While separately, data from China’s top 100 property developers showed the housing market continued to slump last month.

    The economy’s recovery remains fragile as the government sticks to its strict Covid Zero approach of tightening restrictions when virus outbreaks occur. A recent flareup in the southern manufacturing hub of Shenzhen impacted factory operations there. In turn, raising concerns about disruptions to global supply chains.

    “The slowdown was led by production and new orders, signalling disruptions to supply and unstable domestic demand recovery,” said Liu Peiqian, chief China economist at NatWest Group Plc. “Covid-related policies continue to dampen the momentum of recovery and more easing policies are needed to stabilize the domestic demand in coming months.

    Sources – Daily FX & Bloomberg UK


    Majority of commodities tracked continued on their downward trend in the month of July, excluding Zinc which increased by 0.12 (USD/KGS) and Aluminium which increased by 0.03 (USD/KGS). Neodymium dropped by 20 (USD/KGS), followed by Cobalt with an 8.6 (USD/KGS) drop. Smaller decreases were seen by Nickel which dropped 1.69 (USD/KGS), Samarium by 0.80 (USD/KGS) and Copper by 0.48 (USD/KGS).

    Production & Freight Update

    Ports are continuing to operate under extreme pressure, as the COVID delayed Chinese cargo continues to arrive into European ports. This has been combined with the war in Ukraine, vessel unreliability and the world crisis in the energy sector. Therefore, resulting in ports diverting vessels to relieve congestion.

    A fragile global economy and a tightening on consumer spending could lead to a slowdown of demand in Q4 2022. The World Bank President, David Malpass, has stated that “the war in Ukraine, lockdowns in China, supply-chain disruptions, and also the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid”. This should result in a drop in freight spot rates. In turn, giving hope that Global Ocean cargo could ‘normalise’ operations to pre-Covid levels in 2023.

    Two months of Shanghai Covid lockdowns ended at the start of June. However, there has been muted activity at Shanghai’s two main airports. This slow recovery has highlighted the lockdown’s lingering impact on the world’s aviation market. It’s expected to remain stifled, impacting belly-hold cargo, as consumers avoid travel due to the risk of restrictions resulting in disrupted travel arrangements and potential compulsory hotel quarantines. Cargo only airfreight operations, on the other hand, have returned to approx. 80% of their pre-lockdown levels, and courier carriers have lifted all weight limitations on their movements to & from Shanghai.

    Rail Transport Strikes

    In recent weeks, fuel prices have started to fall, after reach record highs in recent months. Haulage companies are monitoring the situation and are amending their fuel surcharges each month to reflect.

    To exacerbate an already pressured and fragile system, there have been continuing threats of strike action around Europe. Felixstowe are the latest to announce strike action. Unions are striving to achieve wage increases that keep up with the pace of inflation. Container terminals were paralyzed across Germany, when works downed tools for a 48hr strike in July. The UFW said in a statement that strike action would halt maritime and road transport into Felixstowe. Therefore, causing major logistical problems.

    A new wave of strikes is expected on UK rail transport in August. This is a result of disagreements around pay and the cost-of-living crisis. The strikes in June & July caused a huge impact, with an 80% reduction in services. Many haulage companies are pre-empting the current negotiations by giving their customers notice of the potential network disruptions should the unions and British Rail executives fail to provide a negotiated solution.


    UK politics have been thrown into turmoil yet again, as Boris Johnson submitted his resignation from the leader of the Conservative Party. The party are in the process of electing their new leader, with the result expected to be announced in early September. Boris Johnson will remain as a caretaker in the PM role during this time, after surviving a confidence vote in his government.

    When he departs his role, one of the main items of unfinished business is the Northern Ireland protocol. Problems remain in Northern Ireland, as the Democratic Unionist Party continue to refuse to take part in the NI Assembly unless the NI protocol is changed. The Northern Ireland Protocol Bill, which has an overall aim of scrapping NI border checks, is expected to reach the House of Lords before October. The legislation proposes that the number of checks on goods intended for sale only in NI would be reduced, and that there would be a separate system for goods intended for final sale in the EU.

    The European Commission has launched fresh legal action against the UK and has warned that renegotiating the terms of the deal is out of the question. The new legislation would be breaking international law, and that if the UK government goes ahead with any of its plans, it will damage the trust between the EU and the UK.

    All eyes will be on the new Prime Minister, watching closely whether they continue with the Bill, if they are successful in getting it passed and how it will affect the Good Friday Agreement and overall stability of Northern Ireland.

    Goudsmit UK

    Goudsmit UK continue to communicate with all customers proactively. We manage expectations and providing multiple solutions, allowing customers to make conscious decisions when balancing cost versus supply chain risk.

    We continue to advise all customers at the point of quotation and order confirmation of the extended lead times. Therefore, allowing any freight delays to be factored in when planning. We would request that you review your current requirements and advise of any issues asap. We’d also urge you to review your requirements for 2022 – 2023 at the earliest opportunity.

    Whilst freight delays are unavoidable at this time, we’re working with our customers by holding larger volumes of UK stock for longer. We would encourage that a minimum of 8-10mths of buffer stock is considered when re-ordering new production. In order to help reduce the impact of freight delays and lessen the potential requirement for costly airfreight.

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