December 15, 2021

“The dollar held recent gains in Asian trading overnight as investors look to The Fed’s MPC meeting, where the central bank is set to unveil a quicker tapering of bond purchases, paving the way for interest-rate hikes next year as high inflation rattles the American economy. The greenback has held firm in recent days despite a mix of intense price pressures, diminishing central bank support and omicron uncertainty is testing markets.”

Tim Hallinan, Trading Director

Main Headlines

US lawmakers have voted to raise the government borrowing limit by $2.5tn, in an eleventh-hour effort to avert default before the end of the year. The Senate voted on Tuesday evening to lift the debt ceiling to $31.4tn in a party-line vote. The House of Representatives later passed the same measure shortly after midnight. The votes came just before a December 15 deadline set by Janet Yellen, US Treasury secretary, who has for weeks warned about the risks of a government default. Republicans and Democrats have been at odds over the debt ceiling, with the GOP insisting that President Joe Biden’s party “go it alone” in lifting the borrowing limit while blaming Democrats for reckless spending.

Consumer price inflation in the U.K. reached 5.1 percent in the 12 months to November, the highest rate since September 2011, according to data released Wednesday by the Office for National Statistics. The same measure of inflation stood at 4.2 percent in October, with fuel and retail products driving the “broad based” surge. Hotel and restaurant prices declined in the period. Chancellor Rishi Sunak said that “we know how challenging rising inflation can be for families and households,” pointing to government aid for the vulnerable through the winter. The increase in inflation was higher than expected by financial experts and comes a day before the Bank of England reveals its latest interest rate decision. Were it not for a rapidly spreading Omicron variant of the coronavirus, a rate hike would be on the cards to bring inflation closer to the BoE’s target of 2 percent. However, uncertainty surrounding the potential effects of the virus is casting doubt on the central bank’s willingness to step in.

GBP

Sterling is well-bid against most majors overnight. Boris Johnson has won backing for Covid passes in England, despite the biggest revolt by Tory MPs since he became PM. A total of 99 Conservatives voted against the government, but the measure was passed by a majority of 243 thanks to Labour support. So, NHS Covid passes, showing a recent negative test or full vaccination, must be shown to get into many large venues, including nightclubs, from Wednesday. The U.K. government is failing to uphold the rights of EU nationals, under the EU Settlement scheme, who lived in Britain for fewer than five years and are now trying to secure residence status, an official watchdog warned. The Independent Monitoring Authority (IMA), which seeks to ensure the rights of EU citizens settled in the U.K. before Brexit are respected, announced Tuesday that it is launching judicial review proceedings against the Home Office.

EUR

The euro is lower against sterling and higher against the dollar overnight. Maltese MEP Roberta Metsola’s odds of becoming the next European Parliament president have shortened dramatically, as incumbent David Sassoli told colleagues he will not run again in January. EU leaders arrive in Brussels today for two days of meetings, with the threat from a resurgent Russia and hybrid attacks by Belarus top of the agenda. Ukraine’s President Volodymyr Zelenskiy is due to meet French President Emmanuel Macron and new German Chancellor Olaf Scholz in a “Normandy 3” format (i.e. minus Russia) at 3 p.m. NATO chief Jens Stoltenberg, whose term expires in the fall, is officially on the job market. The former Norwegian PM has put his name forward to lead the Norwegian central bank — but is up against 21 other candidates. Italy’s Health Minister Roberto Speranza signed an ordinance Tuesday that will require a negative coronavirus test for travellers arriving from other EU countries. Currently, EU travellers can enter the country by showing their digital vaccination certificate. Under the new rules, they will have to show a negative test as well.

USD

The dollar is lower against major currencies in early morning trade. Reported Covid-19 deaths in the U.S. have surpassed 800,000, with the coronavirus pandemic set to continue into the new year. Data from Johns Hopkins University on Tuesday showed the U.S. has exceeded 800,000 Covid-19 fatalities, close to two years after the first deaths from the disease were recorded in the country in February 2020. The House voted unanimously Tuesday to ban imports from China’s Xinjiang region over concerns about the use of forced labour, after a bipartisan agreement was reached with the Senate on the language of the legislation. The bill—the Uyghur Forced Labour Prevention Act—is expected to pass the Senate this week.

Markets

Most Asian stocks fell Wednesday and U.S. equity futures wavered as traders braced for a faster withdrawal of Federal Reserve stimulus and evaluated omicron risks as well as signs of slowing Chinese growth. MSCI Inc.’s Asia-Pacific share gauge slipped for a fourth session, with China and Hong Kong in the red. Chinese data ranging from new home prices to investment and retail sales suggested slowing growth amid a deepening property market slump and Covid disruptions. U.S.-China tension also continues to bubble: the Biden administration is considering imposing tougher sanctions on Semiconductor Manufacturing International Corp., China’s largest chipmaker. The Financial Times reported the U.S. will add eight more Chinese companies to an investment blacklist. S&P 500, Nasdaq 100 and European futures fluctuated. Treasury yields and the dollar dipped. Technology shares led a Wall Street drop Tuesday as investors soured on more richly valued stocks ahead of the Fed policy decision.

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

8:00 a.m.: U.K. Nov. CPI, PPI, retail price index

8:45 a.m.: France Nov. CPI

9:00 a.m.: Spain Nov. CPI

9:00 a.m.: Turkey central government budget balance

10:00 a.m.: Italy Nov. CPI

10:30 a.m.: U.K. Nov. house price index

12:00 p.m.: Norwegian PM’s Christmas press conference

4:30 p.m.: EIA U.S. oil inventory report

5:00 p.m.: Russia 3Q GDP

8:00 p.m.: FOMC rate decision

8:30 p.m.: Powell news conference

Corporate Events

Earnings include Inditex, Lennar, Heico, Trip.com, Nordson

 

To learn more about Ballinger & Co., please visit our website or our LinkedIn page.