Morning Report – Thursday 30th July

Main Headlines

The Federal Reserve left interest rates near zero and vowed to use all its tools to support the recovery from an economic downturn that Chair Jerome Powell called the most severe “in our lifetime.” “The path forward for the economy is extraordinarily uncertain, and will depend in large part on our success in keeping the virus in check,” he told reporters in a virtual press conference Wednesday after the Fed left interest rates near zero. He sounded a dour tone about how long a road is ahead to get back to where the country was only months ago and noted that more fallout from the virus still lies ahead. Gold prices climbed higher to make a new record high of $1979.53 last night after the conclusion of the Federal Reserve meeting.

A disorderly break with the European Union at the end of the year poses a bigger threat to Britain’s food supplies than the coronavirus pandemic that saw supermarket shelves emptied, a Parliamentary committee warned. In a report published today, the Environment, Food and Rural Affairs Committee called on Boris Johnson’s government to complete an urgent review of the food industry’s resilience to shocks like Brexit and climate change. The panel singled out the importation of produce from overseas on a just-in-time basis as a particular concern.

Stock futures were mixed this morning in line with Asian shares as investors weighed a signal from the Federal Reserve that more stimulus will be provided against a slew of earnings and the continued spread of the coronavirus. Shares in Hong Kong, Australia and India outperformed, while gains faded in Tokyo and stocks fluctuated in Shanghai. Futures on the S&P 500 Index edged lower after the gauge extended its July rally. The Australian dollar slipped after new coronavirus cases in the country surged to a record. Treasuries were steady, while gold is off its highs.

GBP

Sterling benefited again yesterday as the dollar weakened over concerns about the impact of the coronavirus pandemic, but was flat against the euro. The pound rose to a five month high against the dollar, close to its pre-coronavirus levels. Some analysts, believe, however, that the surge in sterling may be just a blip, forecasting weakness by the year-end, when Brexit uncertainty may build up again as the transition period comes to an end.

EUR

Against the euro, the dollar was just above a 22 month low touched overnight. The greenback is set for its worst month in a decade versus the common currency as the recovery outlook in Europe brightens just as it darkens in the United States.

USD

The dollar is hovering just shy of two year lows against a basket of currencies as investors grow increasingly worried about the economic drag of surging coronavirus cases in the United States. Overnight, the Federal Reserve kept pressure on the currency by leaving the door open to further easing, while calling out the economic toll from the latest wave of new infections. Fed Chair Jerome Powell said the new wave of cases were harming the recovery and indicated more fiscal support would help when asked what more could be done.

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

8:00 a.m.: Spain July inflation
8:00 a.m.: Austria GDP
8:55 a.m.: Germany July unemployment change
9:00 a.m.: Germany GDP
9:00 a.m.: Italy June unemployment
9:00 a.m.: ECB publishes Economic Bulletin
10:00 a.m.: Euro-area economic confidence
10:00 a.m.: Euro-area June unemployment
10:00 a.m.: Belgium GDP
10:00 a.m.: Italy sells bonds
1:00 p.m.: Germany July inflation
1:30 p.m.: US Initial Jobless Claims