Morning Report

October 21, 2021

“Sterling is slightly down this morning due to Covid jitters, but the pound has been strengthening broadly on growing perceptions the Bank of England will raise interest rates as soon as next month to curb inflation. The dollar has declined since last-week’s 15-months-high, but could grow further ahead of the FOMC meeting in November, at which the start of bond tapering is expected to be announced.”

Sam Cornford, Partner and Head of Trading

Main Headlines

Biden has stepped up his efforts to sell his flagship $3.5tn spending bill to voters amid concerns that the White House has muddled its messaging, as Democrats in Washington make a last push to find a compromise on the package. His plans to raise tax rates on corporate America and wealthy households have been thrown into doubt by resistance from Kyrsten Sinema, the Arizona senator, forcing the White House and senior Democrats to consider other ways to make up the lost revenue. The US president travelled on Wednesday to Scranton, Pennsylvania, to promote the benefits of the package. On Thursday, he will do the same at a televised town hall meeting in Baltimore.

UK government borrowing was significantly lower than forecast in the first half of the fiscal year but a surge in debt costs sent a warning to Chancellor Rishi Sunak ahead of his budget next week. The budget deficit totalled £108.1 billion between April and September, the Office for National Statistics said Thursday. That’s almost 30% below the £151.6 billion predicted by the Office for Budget Responsibility in March, despite inflation driving up interest payments on government debt. The deficit in September alone stood at £21.8 billion, a slightly lower figure than economists expected.


Sterling is weaker against most major currencies this morning. Health secretary Sajid Javid warned that current Covid case rates could double to 100,000 a day in the UK, and that England was facing its last chance to avoid a return of restrictions this winter. The UK has brokered a trade agreement with New Zealand that will cut tariffs on clothing, buses and wine, and, it hopes, lay a foundation for joining a trans-Pacific economic bloc of 11 countries. ScottishPower CEO has urged UK ministers to urgently review the energy price cap, warning that high gas prices could trigger an “absolute massacre” in the retail market.


The euro is higher versus the pound and weaker versus the dollar overnight. The ECB is pushing banks to add hundreds of extra staff and billions of extra capital to their post-Brexit operations in continental Europe. Meanwhile, Jens Weidmann has decided to step down after a decade as head of Germany’s central bank, only weeks after the country’s general election and shortly before a crucial decision on the future of eurozone monetary policy. The Bundesbank president has been one of the most vocal critics of the ultra-loose monetary policy pursued by the ECB, where he fought against its bond buying and negative interest rate policies.


The dollar is stronger against most majors in the early morning trade. Donald Trump is launching a social media platform called TRUTH Social, which will go public via a merger with a blank cheque company, as the former US president seeks to capitalise on his popularity among a large chunk of Republicans. Ecommerce sites have become contributors to rising US inflation, bucking a years-long trend and heralding the prospect of higher prices and fewer discounts on a wide range of products this holiday season, according to research by Adobe. Hundreds of Americans are sick after a mass salmonella outbreak across 37 states.


Most Asian stocks fell Thursday as investors weighed corporate earnings, elevated inflation and the outlook for China’s property sector. Japan’s yen strengthened. Equities retreated in Japan and Hong Kong and were little changed in China. While ailing China Evergrande Group sank on a worsening cash squeeze, other developers rallied after regulators said real-estate risks are controllable. US and European futures were in the red following a mixed Wall Street session in which the S&P 500 neared a record and the tech-heavy Nasdaq 100 slipped. Longer term Treasury yields trimmed an advance. The 10-year breakeven rate – a proxy for where investors see annual inflation rates over the next decade – touched the highest since 2013. A similar measure for Japan reached a three-year high. Crude oil was steady and Bitcoin retreated from an all-time peak. Chinese coal futures plunged amid efforts by officials to contain power costs.

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

8:00 a.m.: Denmark Oct. consumer confidence indicators
8:00 a.m.: U.K. public sector net borrowing
8:45 a.m.: France Oct. manufacturing confidence
10:00 a.m.: Norges Bank 3Q Survey of Bank Lending
10:00 a.m.: Norway’s Sovereign Wealth Fund 3Q Results
11:00 a.m.: Euro-area government debt/GDP ratio
1:00 p.m.: Turkey policy rate
1:00 p.m.: Ukraine key rate
3:00 p.m.: Russia gold and forex reserves
4:00 p.m.: Euro-area Oct. consumer confidence
5:00 p.m.: Riksbank’s Breman speaks
Insights Global weekly oil product inventories
EU leaders meet in Brussels
Corporate Events
Earnings include Intel, Danaher, Barclays, AT&T, S&P, Blackstone, Snap, Marsh McLennan, Atlas CopCo, ABB, Saudi Telecom Company, Chipotle, State Bank of India, Volvo, Nordea Bank, Dow, Southwest Airlines
WeWork expected to complete SPAC merger and begin trading

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