July 13, 2021

“The greenback has edged higher as investors seek safe-haven currencies amid growing concerns that the pandemic once again threatens global economic recovery. US inflation data will be the focus today, as market participants look for clues of early tapering or rate hikes ahead of Fed Chair Jerome Powell’s testimony before Congress tomorrow.”

Sam Cornford, Partner & Head of Trading

Main Headlines

The Biden administration is expected to warn US companies of the increasing risks of operating in Hong Kong later this week in response to China’s exertion of greater control over the territory. This takes place in the context of Biden’s plans to impose more sanctions on China as a result of the crackdown on Hong Kong’s pro-democracy protests and the US accusation of Beijing committing genocide against Uyghurs in Xinjiang. The US is further expected to warn American companies of the risk of violating US law if their supply chain includes entities implicated in forced labour in Xinjiang.

Prime Minister Boris Johnson yesterday confirmed plans to lift nearly all coronavirus restrictions in England from 19 July, despite growing warnings from scientific advisers and rapidly rising cases. While Johnson advised “caution” and stated that “this pandemic is not over”, almost all remaining restrictions on social contact will be removed. Government scientists suggest that the peak of the current wave is due mid-August, by which time hospital admissions could reach between 1000 and 2000 a day. Earlier, the Health Secretary Sajid Javid noted that cases could reach 100,000 a day later in the summer but that, due to the UK’s successful inoculation drive, this would not put “unsustainable pressure on the NHS.”

GBP

Sterling is weaker against most other major currencies this morning. Boris Johnson is set to face a parliamentary rebellion over government plans to cut the UK’s foreign aid budget by about £4 billion to 0.5% of gross national income. The challenge to the Prime Minister’s plans comes from his own party and some Conservative rebels expect there to be sufficient numbers to defeat the vote. Meanwhile, the row over the use of masks on public transport and in shops following 19 July continues, with London Mayor Sadiq Khan urging the government to retain the existing national legal requirement.

EUR

The euro is lower against the dollar and slightly higher against the pound overnight. ECB official Margarita Delgado said that the central bank may take steps to stop excessive dividend payouts in a bid to encourage lenders to use a moderate dividend policy. Meanwhile, Dutch Prime Minister Mark Rutte has apologised for easing coronavirus restrictions as infections in the Netherlands reach their highest levels this year. In a marked U-turn from last week’s “bad press conference”, he conceded that restrictions had been lifted too soon and that the government had “poor judgement”. French President Emmanuel Macron last night announced new measures to tackle a surge of Delta variant infections amid a wider slowdown in the French government’s vaccine rollout.

USD

The dollar is stronger against most other major currencies in the early morning trade. President Biden has called on Cuba’s communist government to listen and respond proactivity to protestors, after demonstrations erupted in response to coronavirus restrictions and food and medicine shortages. Elsewhere, the White House is reportedly discussing plans for a digital trade pact covering Indo-Pacific economies in an attempt to restrain Chinese influence.

Markets

Asian stocks advanced Tuesday after U.S. counterparts notched further all-time highs as investors awaited second-quarter earnings season. Treasury yields were steady after a solid U.S. debt sale. Hong Kong outperformed as Chinese technology shares climbed after government approval of a Tencent Holdings Ltd. deal eased concerns about stricter regulation. U.S. futures fluctuated after the S&P 500 and tech-heavy Nasdaq 100 closed at new highs. European contracts were little changed. The U.S. Treasury sold $58 billion of three-year notes at yields slightly higher than before the auction. Oil rose for the third time in four days as traders grappled with the demand implications of a Covid-19 resurgence in several regions and slowing economic growth in China.

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

8:00 a.m.: Germany June CPI
8:00 a.m.: BOE publishes Financial Stability report
8:45 a.m.: France June CPI
9:00 a.m.: Spain May House Transactions
9:30 a.m.: BOE’s Bailey speaks
2:30 p.m.: U.S. June CPI
3:00 p.m.: Riksbank’s Ingves in panel discussion

Corporate Events

Earnings include JPMorgan, Goldman Sachs, PepsiCo, First Republic Bank, Fastenal, Conagra Brands

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