Morning Report

August 17, 2021

“The dollar made significant gains against a basket of major currencies as the growth of the Delta variant prompted anxiety in the market that the global economic recovery may falter. The security situation in Afghanistan and poor economic data from China further soured risk sentiment and pushed market participants towards safe-haven currencies. All eyes will be on whether Federal Reserve Chair Jerome Powell touches on monetary policy in a speech today or if he waits until next week’s Jackson Hole symposium.”

Tim Hallinan, Trading Director

Main Headlines

President Joe Biden defended the decision to withdraw from Afghanistan in an address last night, blaming Trump’s deal and the Afghan political leaders and army for the pace of the decline. Scenes of chaos and panic at Kabul’s international airport dominated headlines as the Taliban consolidated control of the capital. International criticism has been mounting on the White House for the botched withdrawal and its national security and foreign policy implications. US Secretary of State Antony Blinken spoke with counterparts in Russia and China about the security situation and efforts to evacuate citizens

The UK Parliament is being recalled from summer recess tomorrow to debate the worsening situation in Afghanistan following pressure from the opposition and criticism of the Government’s policy. Both Conservative and Labour MPs have voiced anger at the Government’s response, especially the possibility of Britons and interpreters remaining trapped. It is expected that the Prime Minister will launch a new resettlement scheme for displaced Afghans, separate from the UK’s asylum system. Johnson plans to host a virtual G7 meeting to discuss how to prevent a humanitarian crisis from engulfing the country and stop it becoming a source of international terrorist threats.


Sterling is weaker against most other major currencies this morning. ONS figures suggest that the number of employees on British company payrolls grew by 182,000 in July from June, moving towards pre-pandemic levels, in an indication of the economy recovering following the removal of most Covid-19 restrictions. In part of a government-led push to tackle vaccine hesitancy in young people, large companies, including Asda and are offering promotions and discounts to those who are inoculated in the coming weeks. Health Secretary Sajid Javid has praised the initiative and urged under-30s to take advantage of the programme.


The euro is stronger against the pound and weaker against the dollar overnight. In Germany, Markus Söder, head of the CDU’s sister party, the CSU, has ruled out replacing Armin Laschet as the candidate for chancellor ahead of the election in six weeks. A string of gaffes from Laschet has seen a gradual slip in the polls, raising doubts that the conservative bloc will form part of the next German government. Elsewhere, the EU’s foreign affairs ministers will today hold an emergency virtual meeting to discuss the situation in Afghanistan.


The dollar is stronger against other major currencies in early morning trade. California is bracing for further dangerous fire conditions after over one million acres have burned this year. Crews are currently tackling 10 large blazes, including the Dixie Fire, the second-biggest in state history. Meanwhile, the US will reportedly advise a booster shot eight months after initial vaccinations, and possibly begin to roll them out from mid-September.


Most Asian stocks fell Tuesday as concerns about the impact of the delta coronavirus variant on global growth eclipsed a record-breaking run in the S&P 500. Shares were lower in Australia, Hong Kong and China. U.S. equity futures edged down and European contracts wavered. The S&P 500 closed at another all-time high overnight — doubling from its pandemic low in March 2020. Signs of a slowing Chinese recovery, Beijing’s regulatory clampdown and mobility curbs to fight the delta strain are souring the mood in Asia. Treasury yields declined. Elsewhere, oil held a drop and gold maintained a recent advance. Bitcoin swung back above $46,000.

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

8:00 a.m.: U.K. July jobless claims, 3-month ILO unemployment
9:00 a.m.: Sweden NIER Extra Business Survey
10:30 a.m.: Spain sells bills
11:00 a.m.: Euro-area 2Q GDP, employment
11:00 a.m.: U.K. sells bonds
11:15 a.m.: Switzerland sells bills
11:30 a.m.: Germany sells bonds
11:30 a.m.: ESM sells bills
1:00 p.m.: Turkey sells bonds, linkers
7:30 p.m.: Fed’s Powell hosts town hall with educators
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