December 13, 2021

“With UK Covid alert raised to level 4, the pound has been weakening. Contrary to recent expectations, it now appears next-to-certain that the Bank of England will leave interest rates unchanged at the Thursday meeting due to the risk environment, which would weaken Sterling further. Dollar is set to benefit from meetings of nearly 20 central banks this week as the leader in tapering intentions.”

Sam Cornford, Partner and Head of Trading 

Main Headlines

Joe Biden this week will lobby Senator Joe Manchin, the centrist West Virginia Democrat, in an attempt to lock in a deal on a roughly $2 trillion social-policy and climate bill that Democrats hope to finish by Christmas. Passage hinges largely on the support of Mr. Manchin, who hasn’t endorsed the legislation. He has repeatedly raised concerns about the cost of the bill and the potential effect of new government spending on inflation. Passing the social-program and climate bill known as Build Back Better will be a challenge, as no Republicans are expected to support it and all 50 senators in the Democratic caucus will have to agree to it.

Boris Johnson on Sunday announced that all over-18s across England will be offered their Covid-19 booster jab by the new year, in response to what he called a “tidal wave of Omicron” infections approaching the country. The accelerated rollout would be aided by the deployment of 42 military planning teams across every region, additional vaccine sites and mobile units and extending opening hours so clinics are open seven days a week, Johnson said, “with more appointments early in the morning, in the evening, and at weekends, and training thousands more volunteer vaccinators”.

GBP

Sterling is weaker against most major currencies this morning. Boris Johnson is expected to face one of the biggest rebellions of his premiership this week, with dozens of backbenchers set to vote against new coronavirus restrictions, compounding the sense of crisis engulfing his premiership. Meanwhile, UK ports are on course for their worst year since 1983 after declining North Sea oil production and Brexit put a large dent in cargo volumes. Elsewhere, UK’s largest construction firms and contractors have called on the government to overhaul the procurement process for public building projects in order to slash carbon emissions.

EUR              

The euro is lower versus the dollar and higher versus the pound overnight. The Greek central bank is planning an appeal for the country’s bonds to remain eligible for new European Central Bank purchases after March when the vast bond-buying scheme launched in response to the pandemic is expected to end. German Chancellor Olaf Scholz promised that his government will “do everything” to ensure that natural gas continues to flow through Ukraine and prevent Russia from using its Nord Stream 2 pipeline to cripple Ukraine’s economy. EU leaders meeting in Brussels on Thursday for their last summit of the year are then expected to discuss options regarding the Ukraine situation.

USD  

The dollar is stronger against most majors in the early morning trade. Covid-19 is surging in many parts of America in the wake of Thanksgiving: by Saturday, 34 states had higher seven-day averages for new cases than they did before Thanksgiving, with some of the biggest increases in the Northeast. US President Joe Biden has declared a major federal disaster in Kentucky in the aftermath of a string of deadly tornadoes, which killed at least 80 people in Kentucky. Jerome Powell is expected to kick off Fed tapering this week, at a quicker pace than predicted a month ago as inflation surges.

Markets

Asian stocks were steady Monday while US and European equity futures rose as traders weighed economic risks from the omicron virus variant as well as tighter central bank policies to fight inflation. MSCI Inc.’s Asia-Pacific share gauge was little changed after erasing a climb. A sudden drop in the bonds of developer Shimao Group Holdings Ltd. damped the mood by renewing concerns over the health of Chinese property firms amid Beijing’s clampdown on the real-estate sector. S&P 500, Nasdaq 100 and European futures climbed. US shares closed at a record Friday after an inflation print that was high but in line with predictions.

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

8:00 a.m.: Turkey Oct. current account, industrial production
10:00 a.m.: Italy 3Q unemployment
12:30 p.m.: ECB’s Centeno speaks
3:00 p.m.: President Macron meets PM Orban
6:00 p.m.: BOE financial stability report
6:30 p.m.: BOE financial stability press conference
G-7 finance ministers meet virtually to discuss inflation
CPC blend January loading program
OPEC monthly report
Bloomberg Dec. economic survey: Euro-area, Germany, France, Italy, Spain, Portugal, U.K., Switzerland, Ireland

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