August 25, 2021

“The dollar eased further at the start of the week, as risk related currencies benefited from rising commodity prices and markets set aside concerns about the spread of the Delta variant of the coronavirus, showing the US economy in strong recovery mode. Despite a positive outlook overall for the dollar, it’s position remains vulnerable to shifts based on events unfolding at the Jackson Hole symposium on Thursday.”

Tim Hallinan, Trading Director

Main Headlines

Democrats in the US House of Representatives reached a deal to advance legislation on the core of President Biden’s domestic economic agenda, gaining approval from moderates for a $3.5 trillion spending package. A vote was won by proponents of the spending package by 220-212 yesterday, marking a crucial step towards huge investments in education, childcare and green energy. Moderate Democrats had threatened to hold up approval on the spending package if it meant delaying the separate $1 trillion bipartisan infrastructure bill. House Speaker Nancy Pelosi allayed fears by stating the infrastructure bill would proceed in September.

The UK economy is facing supply chain shortages after momentum slowed sharply in the economy in August as staff shortages reached the worst level on record, leaving businesses unable to keep up with growing demand. Staff are missing work due to Covid-19, with 227,291 positive cases in the past week, whilst the hospitality sector has been hard hit by workers returning to the European Union post-Brexit creating a labour shortage. Restaurant chain Nando’s is struggling with staffing at suppliers’ factories, whilst carmaker Toyota have announced they will have to reduce global production in September by 40%.

GBP

Sterling is higher against the euro and lower against the dollar in early morning trade. Data from the Office for National Statistics showed deaths from Covid in England rose almost 10% between early and mid August, with 468 deaths this week, the worst level since March 2021. Over the past week the number of Covid-19 patients hospitalised has risen by 9.1%. The Welsh government has started plans to resurrect Trawsfyndd small nuclear power plant, to generate economic benefits from the atomic energy plant in North Wales. Small-scale reactors have been identified as a key route for the UK government to meet net zero by 2050.

EUR

The euro is lower against most majors overnight. Angela Merkel’s CDU/CSU bloc is trailing the Social Democrats ahead of next month’s election. According to polling in Germany, SPD support climbed to 23%, inching ahead of Merkel’s CDU/CSU bloc, which is at 22% down from more than 30% as recently as March. The SPD hasn’t led in the polls since 2006. Celebrating 30 years of Ukrainian independence in Kyiv, Foreign Minister Dmytro Kuleba called on the EU to show ambition to adopt a grander strategy welcoming Ukraine, Georgia and Moldova as member states, rather than building relations through the Eastern Partnership agreements.

USD

The dollar is well-bid against most majors in early morning trade. Joe Biden has restated that the United States will withdraw all activity from Afghanistan by the August 31 deadline. The president said he’d asked the Pentagon and the State Department for contingency plans to adjust the deadline “should that become necessary,” and warned of the growing threat of terrorist attacks. Biden earlier rejected a plea from G-7 allies to extend the timetable, leaving less than a week to airlift thousands of people from Kabul, instead asking refugee charities and humanitarian aid agencies to prepare plans to evacuate or provide support to 50,000 Afghans in less than a week’s time when the US withdraws.

Markets

Asian stocks were steady Wednesday as a rebound in Chinese technology stocks stalled and traders weighed the resilience of the economic recovery to the fast-spreading delta virus strain. MSCI Inc.’s wider Asia-Pacific index made modest gains. U.S. and European futures fluctuated in the wake of all-time highs for the S&P 500 and the Nasdaq 100. The 10-year U.S. Treasury yield held a climb. China’s 10-year bond yield slipped amid a short-term cash injection by the central bank. In commodities, oil retreated after the biggest two-day gain since November with Covid-19 still shadowing assessments of the demand outlook.

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

9:00 a.m.: Spain July PPI

9:00 a.m.: Turkey Aug. capacity utilization

10:00 a.m.: Germany Aug. IFO expectations, current assessment

10:00 a.m.: Switzerland Aug. Credit Suisse survey expectations

10:30 a.m.: Iceland 7-day term deposit

10:30 a.m.: ECB VP Guindos speaks

11:00 a.m.: Sweden to sell bonds

11:00 a.m.: Greece to sell bills

4:30 p.m.: EIA U.S. Crude Oil Inventories

6:00 p.m.: Russia July industrial production

Corporate Events

Earnings include Salesforce.com, Royal Bank of Canada, Snowflake, Splunk, Ulta Beauty, NetApp, PetroChina, China Life, Xiaomi

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