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May 23, 2025 24 mins

From a surprise jump in UK inflation to soaring retail sales and a surging pound, Anthony and Piers break down why Britain’s economy is defying expectations and what it means for interest rate cuts.


They also unpack the bizarre logic behind OPEC’s production hike amid falling oil prices, gold’s fresh rally on renewed debt fears, and how Trump’s “Big Beautiful Bill” could push US borrowing costs to record highs.


Essential listening for anyone trying to make sense of inflation surprises, energy market gamesmanship, and the slow-burning fuse of America’s fiscal crisis.


(00:00) Intro & Key Themes

(01:37) UK Inflation and Consumer Confidence

(08:10) Oil Market Dynamics and OPEC's Strategy

(15:15) Gold's Resurgence Amid US Debt Concerns

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Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
End of the week and having a bitof a summary of some of the
major things that have happened in markets in the past few days
and a little bit of a focus on the UK.
And that's because we had UK inflation jumped more than
forecast, in fact its highest rates in over a year on a raft
of price increases. But not only the inflation side

(00:21):
in the UK, we've had retail sales soar once again, somewhat,
you know, defying for the consumer some of these headwinds
from tax hikes, rising householdbills and the ongoing tariff
war. And consumer confidence reading
also came out this morning, which was pretty solid as well.
So unpack all of that. Elsewhere on the the macro kind

(00:42):
of landscape, oil's headed for its first weekly decline in
three. And that's come as OPEC Plus is
weighing another bumper production increase, which in
itself seems a bit odd in a world where global growth is
slowing and they're looking to increase production.
So what's the rationale there for some of these oil producing
nations within OPEC? And then gold is headed for his

(01:05):
biggest weekly gain in more thana month.
So in the quantity space, oil down, gold up.
We have, of course, in the past week had concerns about the US
ongoing fiscal deficit. We had Moody's ratings decision
to strip the US of the final, I think it was AAA rating.
And now this morning you've had the US House passed Trump's big,

(01:29):
beautiful tax spending bill. So quite a lot to unpack there
as well. So yeah, maybe we kick off with
the UK Piers. Yeah, let's do the UK and wow,
inflation is on the up people, which wasn't a surprise because
we talked about this a few weeksago on this podcast.

(01:50):
And this is because, you know, energy bills have risen.
So here in the UK, we have this this body called Ofgem, who
basically control household energy bills and they raise it
and they lower it. They're the regulator.
And depending on what's going onout there from a macro and a
geopolitical point of view and what's the cost of gas and oil

(02:13):
and all this stuff, they kind ofbasically try and control what
utility companies can charge theconsumer, right?
Well, they raised that, that, that level of price, right?
And so we, this is flagged months and months in advance.
So that's bumped up and obviously inflation's gone up
accordingly. What's most important here is it

(02:34):
went up by more than expected though.
So actually in April it was 3.5%.
We were expecting 3.4%, right? The Bank of England's forecast
for inflation in April was 3.4%.They were slightly wrong.
It was higher. OK, so that's one thing.
The other thing is it's the highest, I guess it's the height
because it was 3.4. It's the highest for, yeah, like

(02:57):
15 months. And in this world where we're
desperate to try and get interest rates back down, and
we're going to come on to this at the end of this, the last
topic I want to talk about is government debt and the cost of
it, right? And that's why we're super
desperate to get interest rates down.
And inflation is the same in theUS.

(03:18):
It's just stubbornly not playingball.
And it's actually here in the UKgoing back up, right?
But look, this was flagged. And so you're looking at some of
the markets and I like looking at cable sterling versus the
dollar 135 handle baby 135. The last time we traded there
was back in Feb 2022. I mean, this is like the pan's

(03:40):
like expensive again. What what's going on here?
So the sterling has risen and you might think well why because
it was so telegraphed that inflation would pop higher in
April because of this Ofgem thing.
But I think it's all the other factors that have come along
with it that were were less expected.
We're expecting inflation to go up, it has now will.

(04:01):
So the question then remains or becomes will inflation stay this
high? And here you look at the
economic momentum and as you just said, consumer confidence,
better than expected retail sales, you know, had came in
like a stellar month, up 1.2%. OK, Consumer confidence is, is
obviously pretty solid here. We had GDP figures in the UK

(04:24):
that were better than expected. And so you've actually got this
tale, this story that's a littlebit surprising because of all
those Trump tariff risks and blowing up in the media and
everyone's a bit uncertain and what's going to happen.
And that tends to breed, you know, well a loss of momentum in
things like consumption and it just hasn't.

(04:46):
And so I guess that's the key here.
And why is sterling at 1:35 is because now we're only expecting
one rate cut from the Bank of England for the remainder of
this whole year. So we've revised down our cut
expectations and it's because retail sales are strong,
consumer seems confident actually off gems bumped up the
the levels and and fine inflation is going to stay well

(05:09):
above target. And so that's the tail here.
So just playing devil's advocate, a couple of things on
the inflation side, I did see that the airfares, I think they
were up over 16% from a year ago.
Obviously that's because it's capturing some of the Easter

(05:30):
holiday demand, which is very seasonal in that way.
So that is in that within there amongst a whole bunch of other
stuff. The other thing was retail
sales. You're, you're right.
It's the fourth consecutive monthly rise, best quarter I
think for British retailers since 2000 and and 21. 21, yeah.
However, very importantly, as everyone in the UK will well

(05:54):
have experienced, April was the sunniest month on record in the
UK, or for that month of the year.
The sunniest April, Yeah. Yeah, for that, for that month
of the year. And so obviously what happens as
you very much well did yourself was outcomes, the BBQ, the meats

(06:17):
come in, the supermarket expenses go up, the alcohol
consumption goes up. And so food and alcohol were
categories within the retail component mix that really helped
elevate that. But there's one thing I can
guarantee you about UK weather, it doesn't last long.

(06:38):
And so is that, you know, I meanApril, I mean, do you look at
this and go, this is the fourth consecutive monthly pretty
decent number and in the contextof everything else that's
positive? Or do you look at this and go,
no, it's just a bit of a, this is an April bump.
April weather probably, if you to look at the weather, average
temperatures from last year to this year was probably

(07:00):
considerably different. Yeah.
I mean, it's, I, I don't know honestly is the answer to that.
And I think that's what markets are grappling with at the
moment. Is this sustainable or not?
And the weather obviously weirdly is going to play a key
role in that, I would say. But I mean, just looking ahead
actually this morning talking about off gem and, and raising

(07:20):
that energy cap, they've actually announced they're going
to lower it again come Septemberand they're going to lower it by
7%. So actually that's a little bit
of a bonus. We didn't expect that, right?
So that'll perk people up maybe think, all right, my utility
bills are going to drop later inthe year.
So maybe I'll be, I'll be a little bit more, you know, happy
to get the crack out the wallet.But on the airfares thing, I

(07:42):
mean, I'm currently monitoring, I'm trying to buy flights to
Greece in August and I'm not because they're too expensive.
And I'm like, I'm waiting for them to drop.
You can go online and you can see you can get as far as
booking your seat and the plane's empty.
And I'm like, well, I'm not paying that amount when the
plane is empty. I'm going to wait.
So it's we'll see that there's atussle here between the the the

(08:05):
purchaser and the airlines on price as a bit of a stand off at
the moment. OK, well, let's move on.
Let's talk about oil for a moment.
And so oil has headed the opposite direction because
generally speaking, a lot of geopolitical tensions worldwide
at the moment. There's this tariff risk, which
I guess is kind of on the supplyand demand side.

(08:27):
It's pretty, pretty wild at the moment.
And that uncertainty a lot of the time can can often mean oil
goes up. But we're heading down at the
moment. And one of the key components
here in the news flow in the past week has been that OPEC and
its allies are discussing another output quota increase of
411,000 barrels a day for July. Importantly, just to caveat that

(08:52):
they've not made an agreement, but this is how so.
So just to be clear, if you're an investor or a trader and
you're new to this, OPEC is a very different animal to a
central bank. So the meetings, so basically
there's a video conference on June 1st, so pending in the
coming days. And that's when they settle

(09:13):
their July production rates. And they have a virtual meeting
ahead of that to just get this is on May 28th where they'll
start talking about, you know, how's your compliance levels
been, what's the quotas looking like for this year and so on to
inform them for their decision. So my point being, unlike a
central bank, you'll get all thejuicy information, exactly what

(09:34):
they're discussing and thinking all the way in the run up.
And actually the event in itselfis a pretty foregone conclusion.
So it looks like this is going to happen, Pierce, they're going
to increase production considerably.
But in a world where, as I mentioned, economic growth
concerns are quite evident. So what?
What's the rationale behind thattype of move?

(09:55):
Well, it's, well the line that the media are using is that in
inverted commas, it's to win market share.
Now maybe there's some truth to this, but look, oil's at a four
year low here. I mean, we haven't seen these
levels. Literally February 2021 was the
last time we saw these levels for crude prices.

(10:16):
So obviously these OPEC nations particularly are huge producers
and are incredibly reliant on revenues that come from selling
oil, right? So, but they're playing this
game. It's a delicate balance of
right, well, obviously we'd loveto pump and sell as much oil as
we possibly can because we're soreliant on that revenue.
But of course, the more they pump well, then the more supply

(10:38):
increases, which actually bringsthe price back down, right?
So there's all this game betweensupply and demand and price.
And, and so here they have decided it looks like to ramp up
supply, even though the price istrending lower and is at a four
year low already, which will continue to feed this downtrend,
especially when we continue to be nervous around global growth.

(11:01):
And you know, with Trump's tariff uncertainties, I know a
lot of that uncertainties come away, but the the uncertainty is
still there, right? This whole China thing, we've
got the 90 day clock ticking andwe'll see what happens, right?
But in the meantime, they seem intent to just go ahead,
increase production. But obviously Trump from a
policy point of view, he's drill, baby, drill.

(11:22):
So that's where the US are goingto see production increase.
And the advantage that most OPECnations have over the US is the
cost of production is much lower.
And so if they can, if they can push price down, ironically,
they can win market share by forcing some of those expensive

(11:43):
shale production processes to tohave to go offline because it's
not economically viable at theseprices.
So there's that kind of cat and mouse game here as well.
And I think that ultimately they've they're just a bit fed
up as well. The last few years they cut
production to try and prop up price.
And the US just came in over thetop of them and ramped up

(12:05):
production. I think they're just fed up of
being on that side of this coin and they're like, look, let's
just get production back up. Just a question, is it quite
difficult from a trading perspective to be short this
market and I'm assuming it depends on what type of time
frame? And the reason why I say that is
there's this overall macro negative force for oil prices

(12:29):
with the growth story. But there's been some incidents
in geopolitics this week, which has what's happened is a
response from Israel's been quite forceful.
So it was a midweek report from CNN that U.S. intelligence has
just suggested that Israel was making preparations to strike
uranium nuclear facilities. This was just yesterday.

(12:52):
Yeah. And that that feels like that
that tension between historic those two nations is just
boiling up a little bit again. So if you're shorting this
market and you get the wrong side of one of these pretty big
spikes that can occur like we have seen in years gone by.
So how would you approach that? I mean, that is the life of an

(13:13):
oil trader. Geopolitics is ever present as a
risk, right? I know.
And any moment in time, it always feels like, oh, this
stuff happening and it might flare up and it might.
But but basically we're permanently, you know, you go
back the last 20 years and pretty much there's always
something that might flare up right now it's up to you to

(13:35):
judge, well, how close is that to happening?
What's the probability of that occurring?
Obviously, if it did occur, well, sure, you're in a lot of
trouble if you're short crude and and something of that, you
know, quite extreme nature occurs on the geopolitical
front. So you got to be super careful.
I'd say also like more medium term rather than those.
Anything can happen at any moment type risks which that is

(13:58):
you just got to generally think about this global growth story.
And ultimately here we are getting towards the middle of
the year and all this doom and gloom about recession coming and
global growth momentum slowing. We haven't really seen it.
Just talking about the UK there,right.
And so ultimately, are these economies going to continue to

(14:19):
be more resilient than expected,in which case this this negative
demand outlook is going to have to flip as well?
Final question on oil, At what point does it fall to when you
start going, this is just, this is just value right here, value
expressed through long oil, through oil related companies,

(14:42):
whatever part of that, yeah, let's call it might be?
I mean, look, $50 is always a very important, very
psychological level. I'm looking at WTI crude at the
moment. It's trading 61.
It has gone below there. It did hit like 58, so $50
you're going to get a lot of people go hang on a SEC.

(15:04):
This is looking pretty tasty. But that's what that would be my
response to that. Get the BBQ out 50 bucks.
All right, so the final topic just kind of bringing in the
opposite direction, which is gold.
It kind of, it was soaring pretty one-dimensional trade for
the last recent few months. It did.

(15:26):
Now it's headed for it's biggestweekly gain in more than a
month. So I know there's a couple of
things at play here, namely in and around the the debt
situation of of the US is a predominant focus.
So yeah, if you can explain to me some of the elements of this,
from rating agencies to the debtsituation to the bill that
Trump's got through. Yeah, there's a lot going on

(15:47):
here. Gold.
Look for context has been like medium term has just been one of
the best performing assets of the last 12 months.
And you know in the last 12 months it's gone from 2300 bucks
to 3400 bucks, literally unbelievable scenes.
OK, now over the last, I would say probably, well, the high of

(16:08):
the year, the all time high was April 21st, right.
So since then it's only been four weeks, four or five weeks
where it's just consolidated andwe've had a little bit of a
consolidation pattern. And just this last week, it's a
back on the up, but we're still not back to 3400, which is the
all time high. We're at 3330 right now.
So we're kind of poised here at the top of this monster 12 month

(16:32):
rally. Now is it going to go higher?
Is it not? And at the moment we're back on
the up and looking like threatening to test 3400 again.
And that's because there's a lotof things feeding into this.
So firstly, some safe haven stuff, right?
So let's talk about debt here and let's talk about the US.
And actually what happened is that the is, is the House of

(16:55):
Representatives have have voted through Donald Trump's big
beautiful bill. The irony of this name because
actually internally apparently in in Trump's cabinet.
So Trump's has called this bill,this is his tax cut bill, right?
He's called it the big beautifulbill.
And internally they've been calling it the Triple B, which

(17:18):
carries great irony because Triple B is a rating agency
rating, and it's actually right at the bottom end of investment
grade. So the wiser ironic because
Moody's, the ratings agency, arebasically ahead of this bill
getting voted through in the House.
And it got voted through by one single vote, right, 215 to 214.

(17:41):
Now, this bill isn't done because it's now got to go to
the Senate. They need to vote it through.
If that happens, then it hits Donald's desk and he signs it
off and it becomes law. Why is this important?
Because it basically is going tosee tax cuts extended.
It's going to see spending increase.
We're going to get about another$4.3 trillion added to the
monster debt pile over the next decade.

(18:03):
OK. And Moody's are looking at this
and going hang on a SEC. You know, your debt levels are
already unsustainable. Now you just want to load more
on top. We're cutting your credit
rating. So Friday night last week,
Moody's cut their credit rating from AAA.
And but look, I mean, that in itself.
Well, I should say yeah, from AAA, but they, they.

(18:26):
So there's three key ratings agencies in on this planet.
The three big ones, it's S&P, Moody's and Fitch.
OK. Fitch and S&P, they'd already
cut EU s s credit rating from AAA 1 notch down.
OK, S&P pulled the trigger on that in 2011.
So this is a very old story. And then you could argue, well,
why the hell are Moody's still rating them for AAA?

(18:48):
It seems a bit stupid. So really Moody's are falling
into line here with S&P and Fitch that made a move on this a
long time ago, right? But it's still quite symbolmatic
given the timing and given the debt ceiling crisis that's
looming, given this tax cut billthat's just getting put through.
And so there's a lot of concern growing.

(19:09):
And I think it's definitely the next big thing is debt.
And obviously, since COVID, debtlevels have increased.
And back to interest rates and inflation, the problem is the
longer interest rates stay high,the bigger this problem gets
because the cost of servicing your debt, you know, what are
your debt interest costs is obviously a function of interest

(19:31):
rates. We talked about this a couple of
episodes ago, I think. And what the US are going to see
in 2026 is their debt interest bill will break $1 trillion for
the year and will be the single biggest item in their budget,
their single biggest cut. They'll spend more on debt
interest than they will on defense.

(19:53):
And it's just not sustainable, right?
And Moody's are saying here, hang on, this is just getting
worse. You're going in the wrong
direction, guys. So the thing here is that gold,
things like gold and actually there's, there's a double
positive here because as inflation stays high, preventing
interest rates from coming down,well, gold's a good inflation
hedge. So that's also positive for gold

(20:14):
as well as then this kind of negative sentiment around this
whole debt crisis that's looming.
Isn't Gold then thinking and howyou were describing that?
I know you're quite, quite passionate about the the ticking
time bomb that is U.S. debt, butI can't help but feel that if

(20:35):
you were thinking long term, I can't see any other way than
this U.S. debt pile continuing to increase and therefore the
concerns that you're highlighting will compound and
compound. Wouldn't gold just be a pretty
sensible asset to own over the long term as part of a portfolio

(21:00):
mix? It it, it has been for 12 months
because it's gone up and it willcontinue to be so I'm not.
Talking 12 months, I'm talking this, this, this U.S. debt
problem is, is not going to get solved and it's not going to go
down. So by definition, does that not
mean the gold talking gold long term, 10 years, 20 years, like

(21:22):
yeah, forget 3004 thousand 5000 like it's just going to get.
More supply agree goal. It was a waste of time owning
gold for a decade right now it'snot now it's a really important
thing in your portfolio, I'd say.
And look what why is it different this time with the US
debt? Because well, let's maybe talk
about Japan because they got they're in the same boat in many

(21:45):
ways, right? Japanese debt, well, hang on,
the US debt to GDP ratio is 125%, OK, way too high, not
sustainable. Japan's debt to GDP ratio 263%,
right? That's the highest out of any
developed nation now. So you might say, well, hang on,
they've had that kind of debt level for decades.

(22:08):
So why are we worrying about this?
It's not really a problem. It's never been a problem, so
why should it now suddenly become a problem?
And the difference now is interest rates are high.
Japan's had zero interest rates for decades.
So huge amounts of debt, fine, the servicing costs of that debt
are low. Well, now COVID triggered an

(22:29):
inflation uptick in Japan that they haven't seen for decades.
So inflation's high, right? Actually, you're getting to see
some, some actual economic momentum in Japan.
Economically, things are lookingpretty good.
OK, so our inflation expectations rise further.
The central bank are going to beraising interest rates.
OK. They're currently trying to
taper off their QE program. This is all feeding into bond

(22:54):
yields rising. And actually the 30 year
Japanese government bond yield is at a record ever high.
Now, why is that important? Because they're sat on a monster
mountain of debt. And if interest rates are going
to go up now, the cost of that debt is rapidly going to

(23:14):
increase. Like put numbers on it with the
USI said this last week, right? Typically the US would pay 3 to
$400 billion a year on interest.OK, that's look at that last
decade, last 15 years, 3 to 400 billion, right?
3 to 400 billion every year. Next year it's going to be a
trillion plus. It's just suddenly on
exponential. So that is why this debt

(23:37):
situation, if interest rates cannot come down, then this
debt, this debt crisis is going to really become the dominant
force. OK, well, on that happy note,
we'll we'll send people on theirway for a merry old weekend.
So, yeah, sleep well. And until the next episode,

(24:01):
unless there's anything out thatyou can, you can lift the
spirits. Is there anything that positive
to say to finish? Well, Tottenham won the European
Cup, so you know I'll. Repeat my question, is there
anything positive to say to finish?
It's just getting more doom. And gloom it is.

(24:21):
I mean, I'm happy. I'm a very happy man.
Forget that. Whatever.
Tottenham have got a trophy in the cabinet.
Yeah, that's all. The world's burning.
You can be there with your Spursshirt on.
OK. All right.
Thanks, Piers, and thanks everyone for listening.
And we'll see you next week. Take care.
Have a good weekend.
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