Morning Report – Thursday 11 February

Jon Robson, Head of Trading

“Although crucial in supporting the stimulus, Powell’s commitment to sustained low inflation will negatively affect the dollar. The euro could gain from the dollar’s weakness, yet the delays in vaccination and the ECB’s hesitance stand in the way.”

Main Headlines

Federal Reserve Chairman Jerome Powell stressed the importance of “patiently accommodative” monetary policy to support the struggling US labour market, as he moved to stamp out concerns that additional fiscal stimulus could trigger a sudden jump in inflation. Speaking to the Economic Club of New York on Wednesday, Powell said the U.S. job market remains a long way from a full recovery and called on both lawmakers and the private sector to support workers.

U.K. house prices rose last month, despite weaker activity in the property market amid a third national coronavirus lockdown. The Royal Institution of Chartered Surveyors said values rose across the country as house hunters found suitable properties in short supply, with London the only region to see prices decline.

GBP

Sterling is higher versus the dollar and unchanged against the euro this morning. Bank of England Governor Andrew Bailey said it’s not in the U.K.’s interest to dramatically ease banking rules following Brexit. Meanwhile, official data from the UK’s vaccination campaign show that a single dose of the BioNTech/Pfizer jab offers good protection against Covid-19, boosting the government’s approach of extending the gap between doses.

EUR

The euro is stronger against the dollar and unchanged against sterling overnight. The European Commission has rejected UK requests to overturn an export ban on live shellfish including types of oysters, clams and mussels, escalating a dispute over seafood that has soured tense post-Brexit relations. Brussels has sent a warning letter to the UK to address “shortcomings” in its application of post-Brexit customs rules for Northern Ireland on the eve of a crunch meeting tomorrow.

USD

The dollar is lower against most majors in the early morning trade. The U.S. budget deficit totalled a record $736 billion during the first four months of fiscal 2021, an 89% increase compared with the same period a year earlier, as government spending outpaced revenue. U.S. core inflation last month was zero, data showed on Wednesday, against market expectations of 0.2%.

Markets

The stock rally paused Thursday and U.S. and European equity futures were steady. S&P 500 contracts ticked higher after the index ended virtually flat near a record high. The 10-year Treasury yield fell back below 1.15% after U.S. core consumer prices signaled scant inflation. Asian stocks posted modest gains amid low volumes, with Chinese, Japanese and South Korean markets closed. Hong Kong equities shrugged off a report that Chinese authorities had detained a Tencent Holdings Ltd. executive. Crude oil dropped after a spell of gains, gold was little changed.

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

8:45 a.m.: ECB’s Villeroy speaks
9:00 a.m.: ECB’s Guindos speaks
11:00 a.m.: EU publishes economic forecasts
11:00 a.m.: Italy sells bonds
12:00 p.m.: ECB’s Knot speaks
2:00 p.m.: Russia Dec. Trade
2:30 p.m.: U.S. Initial Jobless Claims
6:00 p.m.: South Africa’s Ramaphosa’s State of the Nation address
European Financial Forum 2021
OPEC and IEA monthly oil market reports
Lunar New Year public holidays begin in nations across Asia

Corporate Events

Earnings include AstraZeneca, L’Oreal, Pernod Ricard, ArcelorMittal, Credit Agricole, Commerzbank, Disney, PepsiCo

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