2 December, 2021

“Currency markets are seeing the highest volatility in almost 9 months, with Jay Powell at a hawkish pivot and a rebound of Covid uncertainty. Market participants will be looking to employment data later on Thursday for more clues on the Fed’s likely moves.”

Sam Cornford, Partner and Head of Trading 

Main Headlines

Federal Reserve Chair Jerome Powell signalled support for speeding up the policy support withdrawal, reinforcing the message that the US central bank would keep inflation in check for the second time this week. The Fed chair’s testimony at a congressional hearing exacerbated a stock market sell-off. Powell said he expected the Federal Open Market Committee to discuss a speedier taper at its next meeting on December 14 and 15. He also told the Senate that he wanted to retire the word “transitory” to describe inflation, and in his written remarks said it will “linger well into next year.”

The US is delaying a deal to remove Trump-era tariffs on UK steel and aluminium because of Washington’s concerns about London’s threats to change post-Brexit trading rules in Northern Ireland. Official cited US concerns at British threats to trigger Article 16, a safeguard clause in the post-Brexit Northern Ireland protocol that overrides part of the UK’s exit with the EU and would suspend checks on goods travelling to Northern Ireland from the rest of the UK. The EU and US agreed to suspend tariffs on billions of dollars of steel and aluminium in October.

​​​​​GBP

Sterling is lower against the dollar and higher against the euro this morning. The UK will purchase an additional 114m coronavirus vaccine doses for use over the next two years, including modified jabs for tackling future variants. Japanese conglomerate Fujifilm is making the largest investment in UK pharmaceuticals manufacturing in decades, spending £400m to double the size of its Teesside plant that has been making the Novavax Covid-19 vaccine. Elsewhere, energy companies have warned that 30,000 UK households still without electricity since Storm Arwen hit at the weekend would remain without power until at least Friday.

EUR

The euro is lower versus most major currencies overnight. Rising Covid infections, a new coronavirus variant and the reimposition of pandemic restrictions are threatening the eurozone’s economic rebound, with fewer people going out to shop, eat at restaurants and visit cinemas, high frequency data show. Over half of EU companies received some form of state support during the pandemic, allowing many more of them to preserve their investment plans than initially expected, according to new research by the European Investment Bank. After Portugal and Italy’s successes entrusting military commanders with vaccination campaigns, Germany is appointing a major general to that role.

USD  

The dollar is stronger against most majors in the early morning trade. The first known case of the Omicron variant in the U.S. was identified in a San Francisco resident who recently returned from South Africa, the Centers for Disease Control and Prevention and California health officials said. President Biden is considering imposing stricter testing rules for international traveling rules, which he is expected to propose in a speech on Thursday. Vice President Kamala Harris’s senior adviser and chief spokesperson Symone Sanders is leaving by the end of the year, the latest high-profile departure from her office amid growing concerns over Harris’s communication strategy and how well she is being positioned for future roles.

Markets

Stocks in Europe fell, led by the technology sector after Apple warned component suppliers of slowing demand for its iPhone 13 lineup. Travel stocks were also among major decliners in the Stoxx Europe 600 index. US equity futures climbed, shrugging off a weak Wall Street close. In Hong Kong, an index of Chinese technology shares retreated amid Beijing’s plan to close a loophole used by tech firms to list abroad. Treasuries yields rose after a rally that sent the benchmark 30-year rate to the lowest since early January.

Main Economic Data/Central Banks/Government (All times CET)

9:00 a.m.: Italy’s Franco speaks at Rome Investment Forum
9:00 a.m.: Spain Nov. unemployment change
10:00 a.m.: Italy Oct. unemployment rate
11:00 a.m.: Euro-area Oct. unemployment rate, PPI
12:00 p.m.: Sweden’s Ohlsson speaks
2:30 p.m.: U.S. initial jobless claims
3:00 p.m.: ECB’s Panetta chairs ECB fiscal conference panel
OPEC and non-OPEC ministerial virtual conference

Corporate Events

Earnings include Dollar General, Kroger, DocuSign, Marvell Technology, Asana

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