Morning Report – Friday 9 April

Jon Robson, Head of Trading

“Despite the dollar’s advance this morning, the U.S. currency is heading for its softest week of the year. Bets on the dollar were trimmed as employment figures rose unexpectedly on Thursday and Powell insisted that the Fed policy will not deviate from its accommodative stance. The euro, on the other hand, enjoyed the bloc’s sudden business activity growth, indicated by factory gate price rises.”

Main Headlines

Speaking to the virtual IMF panel, the Fed chief Jerome Powell played down the risk that inflation could get out of control as the pandemic recedes. He signalled that super-easy monetary policy will remain in place even as data shows the economy kicking into higher gear. Powell pledged to get America back to a “great economy” as he spoke of his commute home, which takes him past a “substantial tent city,” and his thoughts of the millions of Americans who are still trying to get back to work. He deflected a question over whether he’d serve a second term.

The Treasury released two text messages showing that Chancellor Rishi Sunak “pushed” Treasury officials to help Greensill Capital gain access to a Bank of England coronavirus support scheme after being lobbied by David Cameron. Sunak told the former Prime Minister he had asked his team to look at ways to give Greensill access to the state’s pandemic corporate support program last year. The Chancellor’s aides the messages were released to prove that he acted properly.

GBP

Sterling is lower against other major currencies this morning. The U.K. will decide by early next month whether Britons can resume taking international holidays on May 17. Transport secretary Grant Shapps will on Friday confirm plans in England for a “traffic light system” for foreign travel, but each option will involve PCR tests upon return to try to track new variants of the virus entering the country.

EUR

The euro is weaker versus the dollar and stronger against the pound overnight. Members of the European Central Bank’s governing council expressed concern that the slow pace of Covid-19 vaccinations in the eurozone might delay the union’s economic recovery. Meanwhile, Angela Merkel’s plan to channel more power over Germany’s pandemic response to the federal government won backing from leaders of the minority Green and FDP parties.

USD

The dollar is higher against other majors in the early morning trade. Joe Biden said he is open to compromise on his $2tn infrastructure plan amid a backlash from businesses over a proposed $2.5tn increase in corporate taxes to fund it. Earlier on Wednesday, Janet Yellen called on corporate America to embrace what she called “mutually beneficial” tax increases, saying Biden’s plan would deliver a 1.6 per cent boost to gross domestic product by 2024.

Markets

Chinese stocks slid Friday, dragging on MSCI Inc.’s Asia-Pacific share gauge, after data showed the nation’s fastest factory inflation since 2018. U.S. equity futures erased earlier gains and European contracts fluctuated. The S&P 500 notched an all-time high overnight amid low volumes on U.S. exchanges, while the Nasdaq 100 rose 1%. Ten-year Treasury yields inched up from the two-week low touched earlier on Powell’s reassurance. Treasury 20-year bonds had outperformed after comments from New York Fed Executive Vice President Lorie Logan sparked talk of the central bank boosting purchases in this maturity. Oil fluctuated below $60 a barrel as Saudi Arabia defended the OPEC+ plan to boost output, and said the alliance can change course if needed.

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

8:00 a.m.: Germany March CPI, Feb. industrial production, trade

8:45 a.m.: France Feb. industrial production

9:00 a.m.: Spain Feb. industrial output

10:00 a.m.: Italy Feb. retail sales

11:00 a.m.: Italy, U.K. sell bills

11:45 a.m.: Norway’s finance minister presents white paper on wealth fund

3:00 p.m.: Russia 1Q Current Account, Feb. Trade

6:00 p.m.: USDA April WASDE Report

7:00 p.m.: Baker Hughes U.S. Rig Count

Corporate Events

Earnings include Industrivarden, Nobina

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