Morning Report – Tuesday 9 February

Jon Robson, Head of Trading

“The dollar has continued to retreat since Friday. The prospect of stimulus had been pushing the greenback up however, a relief package would cause losses for the U.S currency in the longer term, as massive fiscal spending would be coupled with continued ultra-easy Federal Reserve monetary policy.”

Main Headlines

House Democrats are proposing to limit the next round of Covid-19 relief payments to households earning less than $200,000, after criticism that President Joe Biden’s $1.9 trillion stimulus package would benefit the rich. Democrats released the biggest piece of their coronavirus relief bill late Monday and the text makes clear that House Democratic leaders are rejecting a push by some moderate Democrats to lower the threshold at which payments begin phasing out.

All travellers entering the UK from abroad will have to take two Covid-19 tests after arriving in the country as the government seeks to bolster its borders against new variants of the disease. The new system, to be announced as early as Tuesday, will mean all arrivals must have a negative test from before their departure — which is already the case — then take further tests on days two and eight of their self-isolation after entering the UK. Passengers will be responsible for paying for the tests themselves.

GBP

Sterling is stronger against most major currencies this morning. England’s third lockdown hit non-essential retailers harder than the previous one in November, hampering spending and confidence, according to the British Retail Consortium. The opposition warned that U.K. businesses face a 50 billion-pound “bombshell” unless a series of government pandemic aid programs are extended.

EUR

The euro is stronger against the dollar in the early morning trade. European Central Bank President Christine Lagarde pledged monetary support for the economy amid extended coronavirus lockdowns and said governments must do the same. The French economy is still on course to rebound 5% this year despite the uncertainty created by the coronavirus pandemic, the head of the central bank said on Tuesday.

USD

The dollar was lower versus most majors overnight. The Congressional Budget Office said on Monday that Joe Biden’s plan to raise the minimum wage to $15 per hour by 2025 would cut employment by 1.4 million jobs that year and increase the budget deficit by $54 billion over the next 10 years. Democratic lawmakers rejected Donald Trump’s efforts to throw out the impeachment case against him, one day before the former president’s Senate trial was set to begin.

Markets

Stocks were little changed in Japan and Hong Kong, and retreated in South Korea and Australia. U.S. and European futures dipped. Chinese shares gained ahead of the Lunar New Year Holiday. Earlier, U.S. shares closed higher for a sixth straight session with the S&P 500 at a record, spurred by fresh signs the Biden administration is committed to passing a sizable aid bill to address unemployment. Treasuries advanced. Commodities prices pointed to renewed optimism in the global economic recovery. Brent oil extended an advance above $60 a barrel on signs the global market is tightening and demand is improving. The average yield on U.S. junk bonds dropped below 4% for the first time ever on Monday. Gold is higher.

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

8:00 a.m.: Germany Dec. Trade

10:00 a.m.: Italy Dec. Industrial Production

10:30 a.m.: Spain sells bills

12:30 p.m.: Germany sells bonds

Corporate Events

Earnings include Willis Towers Watson, Qiagen, Cisco, Fidelity, S&P Global, Twitter

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