27 July 2021

“With minor dips, the dollar has been on the rise for over a month as market participants reacted to the Fed’s hawkish turn. Tomorrow’s meeting of the Fed, therefore, is one of the most important determinants of the dollar’s direction this week. Market participants have regained some confidence the pound is growing in response to the unexpected downward trend in the Covid infections curve.”

Sam Cornford, Partner & Head of Trading

Main Headlines

The Biden administration has said it will maintain its Covid-related travel bans for the foreseeable future on a range of countries, including the UK, the EU and China. The White House cited the spread of the more transmissible Delta variant both in America and abroad in a decision that will disappoint European countries and airlines ahead of the summer holiday season. The bans do not apply to US citizens or any immediate family they are travelling with, nor to green-card holders or people who secure special exemptions, mostly for work-related reasons.

While there is no consensus on what’s behind the decline in case numbers, or whether the current wave of infections has peaked, the sustained fall in new coronavirus cases in the UK is being cautiously welcomed by scientists. 24,950 new cases were recorded on Monday, down for a sixth day and well below the 39,950 from a week earlier. The end of the Euro’s, a period of sunny weather and the start of the school holidays, alongside the vaccine rollout could be causing the drop. The government is not yet celebrating, with Johnson’s spokesman telling reporters Monday the premier “doesn’t think we are out of the woods yet.”

GBP

Sterling is lower against the dollar and higher against the euro this morning. Workplaces in the City of London were the busiest they’ve been for 16 months last week after the government dropped coronavirus restrictions in England. Still, attendance is yet to exceed 50% of pre-pandemic levels. The UK government will this week consider loosening travel restrictions for travellers from the EU and the US. Ministers are separately looking at removing France from the newly created “amber plus” category, which requires travellers from the UK to quarantine upon their return.

EUR

The euro is weaker versus most major currencies overnight. German business confidence has dipped from a decade-long high as companies grow more concerned about the impact of global supply chain disruption and a resurgence in coronavirus infections, according to a closely watched survey. Expectations for the next six months dropped, outweighing an improvement in sentiment about current conditions. Sentiment worsened among services, manufacturing and retail trade companies; construction was the only sector in which the outlook continued to brighten.

USD

The dollar is higher against most majors in the early morning trade. Aon and Willis Towers Watson abandoned a more than $30 billion tie-up to create the world’s largest insurance broker, deciding it wasn’t worth pursuing in the face of Justice Department opposition to the merger. An increase in Covid-19 cases across the US is leading to new vaccination mandates for public employees, with the Department of Veterans Affairs on Monday becoming the first federal agency, California the first state, and New York the first major city to announce requirements for their workers.

Markets

MSCI Inc.’s Asia-Pacific equity gauge retreated and a Hong Kong index of Chinese tech firms plunged more than 5%. European contracts and U.S stock futures slipped after the S&P 500 hit a new peak. Earnings have helped Wall Street, with Tesla Inc. the latest firm to post better-than-expected performance. Apple Inc. and Alphabet Inc. are among companies due to unveil results next. Treasuries climbed ahead of this week’s Federal Reserve policy meeting, where officials are expected to discuss an eventual tapering of stimulus. The real yield on U.S. 10-year debt touched a record low, which for some reflects economic concerns from the spread of the delta coronavirus variant.

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

9:30 a.m.: Sweden June Trade Balance

10:00 a.m.: Euro-area June M3

11:00 a.m.: Germany EU Auction of EUAs

11:00 a.m.: Italy to sell up to 3.75 billion euros of 2024 bonds

12:00 p.m.: France 2Q Total Jobseekers

12:00 p.m.: U.K. July CBI Retailing Reported Sales

4:00 p.m.: ECB’s Hernandez de Cos speaks

Narendra Modi to meet Antony Blinken in New Delhi

Corporate Events

Earnings include Kering, Chubb, Reckitt Benckiser, Neste, Hexagon, Deutsche Boerse, Worldline, Microsoft, Visa, United Parcel Service, Starbucks, Raytheon, Apple, Alphabet, 3M

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