Morning Report

August 27, 2021

“The dollar paused on Friday as investors wait to gauge the impact on currency markets of Federal Reserve Chair Jerome Powell’s highly-anticipated speech after fresh calls for early tapering from a few hawkish Fed policymakers. A more dovish tone from the Fed Chair would limit any economic damage from the Delta variant of the coronavirus.”

Tim Hallinan, Trading Director

Main Headlines

US investors cut leverage for the first time since the beginning of the pandemic in March 2020, dialling back some of the borrowed money which has fuelled a rally in stocks. Investors had borrowed $844bn against their portfolios in July, down from a record $882bn and the lowest level since March. The reduction in borrowing follows a stellar run for US stocks, with the benchmark S&P 500 supported index up by 19.7% so far this year, in part due to stimulus out of Washington. The broader US economic picture remains hazy, due to fears that the Delta variant could cool consumer spending, investment and manufacturing outputs.

Labour shortages across the UK economy have become common during the ‘pingdemic’ era, with UK farming the most recent industry to be hit. In the last seven days, there were 238,505 positive Covid-19 cases confirmed, meaning cases are up by 24% week-on-week. Most slaughterhouses are operating at 75% capacity in the UK and the National Pig Association has warned that it may be forced to cull 70,000 healthy animals due to the labour shortages impacting the farming sector. A lack of workers has hit food production and haulage and looks set to have a knock-on effect on supply chains.


Sterling is lower against the euro and higher against the dollar in early morning trade. The Transport Department announced that Canada, Denmark, Finland, Liechtenstein and Lithuania, Switzerland and Portugal’s Azores Islands would move to the ‘green list’ on August 30th. Meanwhile, Thailand and Montenegro moved to the ‘red list’ from the same date. The US has entered the final stages of its evacuation efforts in Afghanistan, having worked day and night to process British citizens and Afghan citizens since August 13th. Defence Secretary Ben Wallace announced that 13,146 people had been evacuated from Kabul by the UK.


The euro is well-bid against most majors in early morning trade. Michel Barnier has announced that he wishes would make a presidential bid in France, as the candidate for Les Republicains, a French conservative party. The former EU chief Brexit negotiator has long planned a return to French politics and will now compete in a crowded centre-right space in France alongside Xavier Bertrand and Valerie Pecresse are household names. The European Court of Human Rights has asked Latvia and Poland to help Iraqi and Afghan migrants stuck on the border with Belarus, by providing food, water, clothing, medical care and shelter.


The dollar is lower against most majors overnight. US President Joe Biden promised to press on with the evacuation from Afghanistan, in a shaky speech at the White House yesterday evening. Biden described the death of 13 US troops and at least 90 Afghan civilians, following a bomb attack perpetrated by IS-K, as the worst day in his eight-month presidency so far. He pledged to hunt down the perpetrators of the bomb attack at a time of the US’ choosing in any location around the world. The bomb attack is only the latest policy failure, following the redeployment of troops to Kabul airport to aid evacuation and the Taliban’s seizure of power ten days ago.


Asian stocks were steady Friday and U.S. futures rose ahead of a key Federal Reserve gathering that may offer clues about the timeline for tapering stimulus. MSCI Inc.’s Asia-Pacific gauge eked out a gain, with stocks climbing in China, where the central bank supported sentiment after signalling targeted steps to cushion the economy. S&P 500 and Nasdaq 100 futures advanced and European contracts were little changed as traders awaited Fed Chair Jerome Powell’s speech at the Jackson Hole symposium. Treasury yields edged lower.

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

8:00 a.m.: Germany July import price index
8:00 a.m.: Norway July retail sales
8:45 a.m.: France Aug. consumer confidence
9:00 a.m.: Sweden Aug. economic tendency survey
9:30 a.m.: Sweden 2Q GDP, July Retail Sales
10:00 a.m.: Italy Aug. consumer confidence, manufacturing confidence
11:00 a.m.: Italy sells bills
12:00 p.m.: U.K. sells bills
1:00 p.m.: Riksbank’s Skingsley speaks at seminar
2:30 p.m.: U.S. July PCE deflator
2:55 p.m.: Swiss and Hungarian foreign ministers meet
4:00 p.m.: Jerome Powell speaks at Jackson Hole symposium
7:00 p.m.: Baker Hughes U.S. rig count

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