Morning Report – Friday 14 May

Sam Cornford, Senior FX Dealer said:

“While the US’s vaccine rollouts seem to prompt economic normalisation, underlying inflation concerns will remain for now. Biden’s $4.1 trillion jobs and infrastructure plan could further intensify worries about an over-heated economy.”

Main Headlines

The CDC, the US’s top public health agency said that fully vaccinated people could forgo face coverings for almost all indoor and outdoor settings, a significant loosening of social distancing guidance that President Biden hailed as a “great milestone” in the fight against the pandemic. The Colonial pipeline resumed operations on Wednesday, allowing petroleum supplies to begin reaching eastern US states five days after a cyberattack caused a shutdown that precipitated a run on fuel at petrol stations.

Former PM, David Cameron, defended his lobbying of UK ministers and officials on behalf of Greensill Capital, insisting it was to benefit the economy rather than preserve the value of his share options in the company. He refused to say how much money he was on track to earn from the supply-chain finance company before it went into administration. Mario Draghi has waived his €115,000 salary as Italy’s prime minister as he attempts to lead his country out of a health and economic crisis. He stated that he would not receive “any remuneration of any kind” during his time in office.

GBP

The pound is stronger than the dollar but weaker than the euro in the early morning trade. BoE Governor Andrew Bailey said there might be a role for a state-backed digital currency in Britain although there would be big implications ranging from the setting of interest rates to privacy. “It may well be that we do end up with a digital currency. It’s a few years off at the moment,” Bailey said at a public event organised by the BoE. The use of cash was falling but creating a central bank-backed currency would have significant impacts on the financial system and beyond, Bailey said.

EUR

The euro is well bid against most majors this morning. Poland’s supreme audit office has accused PM Mateusz Morawiecki of exceeding his powers, as it unveiled a highly critical report into the government’s attempt to hold last year’s presidential election by post because of the pandemic. The salvo by the supreme audit office is the latest in a series of clashes between the ruling Law and Justice party and Marian Banaś, a former finance minister who was put in charge of the NIK in 2019 thanks to the support of politicians from the ruling camp, but has since become a thorn in the government’s side.

USD

The dollar is weaker than most majors overnight. Democratic and Republican congressional leaders agreed to press on in search of a compromise on Joe Biden’s infrastructure spending package, even as Republicans ruled out reversing Donald Trump’s tax cuts as part of any deal. The president’s current proposal includes a $2.3tn infrastructure spending plan that would inject government funding into roads, bridges, transport hubs, water facilities, broadband and manufacturing capacity across the country.

Markets

Stocks rebounded Friday and U.S. equity futures rose after Wall Street halted a three-day slide on signs of a strengthening economic recovery. Sliding commodity prices helped soothe some concerns about inflation risks. MSCI Inc.’s Asia-Pacific share gauge advanced more than 1%, led by Japan, bringing some relief after a bruising week in which worries about price pressures sapped equities. Singapore’s index fell as the island-state enacted new restrictions to curb a flareup in virus cases. European futures climbed along with S&P 500 and Nasdaq 100 contracts after rallies in indexes overnight. Industrial and financial shares outperformed, while energy producers joined a slump in oil. Gold futures dipped 0.1% to $1,825.61 an ounce.

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

9:00 a.m.: Spain April CPI

10:00 a.m.: Poland April CPI, GDP

12:00 p.m.: U.K. sells bills

1:30 p.m.: ECB minutes

2:30 p.m.: U.S. April retail sales

7:00 p.m.: Baker Hughes U.S. rig count

Corporate Events

Deadline for talks between Veolia Environment and Suez on water assets

Earnings include Knorr-Bremse, Sage Group

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