Morning report – Tuesday 16 March

Jon Robson, Head of Trading

“The dollar’s direction of travel will likely be determined by the two-day Federal Open Market Committee that is starting today. Market participants will be most attentive to what the Fed has to say about the run-up in yields. We expect Fed officials still see a very long period of easy policy ahead with no intention of tightening policy anytime soon.”

Main Headlines

The Biden administration has dispatched a federal disaster agency to help deal with a surge in child migrants arriving at the US border with Mexico that has reignited a partisan row over immigration. Rising numbers of people including nearly 9,500 unaccompanied children have arrived at the south-west border from Mexico and central American countries, surpassing an April 2019 peak under the Donald Trump administration.

Germany, Italy, France and Spain joined the ranks of European countries that have temporarily halted use of the AstraZeneca Covid-19 shot over blood-clot concerns, dealing another blow to the continent’s sluggish vaccination rollout and threatening the credibility of the vaccine itself. Now the European Union’s vaccine roll-out hangs partly on the findings by the European Medicines Agency, which plans to decide on the next steps on Thursday. Concerns surrounding the shot are also likely to dominate a video conference by EU health ministers slated for later on Tuesday.

GBP

Sterling is lower against most major currencies overnight. Prime Minister Boris Johnson will redirect British foreign policy toward the Indo-Pacific region as he sets out a sweeping overhaul of the U.K.’s international priorities after Brexit. He will publish a 100-page blueprint for diplomacy and defence, which his officials are billing as the most wide ranging re-evaluation of the U.K.’s place in the world since the end of the Cold War. Johnson intends to visit India at the end of April on his first trip overseas since Britain left the European Union trade and market regime.

EUR

The euro is weaker against the dollar but stronger against the pound this morning. Even with the setbacks, the EU sees a light at the end of the pandemic tunnel. The bloc will release a document tomorrow citing progress in reducing infections, “raising the prospect of a lifting of the restrictions.” The ECDC aims to release a tier system taking into account each member’s progress next month. Meantime, a surge in contagion is forcing some to prolong or reimpose curbs, and the Astra troubles may delay inoculation goals by a month.

USD

The dollar was higher against most majors in the early morning trade. US airline executives said they are starting to see a path out of the coronavirus pandemic as more passengers resume travel. More people flew in the US this past weekend than any time since the coronavirus pandemic crushed air travel a year ago. Major U.S. airlines lost about $35 billion in 2020.

Markets

Asian stocks rose Tuesday after optimism about the economic recovery drove U.S. shares to record highs. Treasury yields slipped as traders await the Federal Reserve’s policy statement for clues about its outlook. Markets saw modest gains in Japan and China, where investors were watching for a possible broader crackdown on the internet sector. S&P 500 futures fluctuated after the benchmark advanced for a fifth session, led by utilities and real estate shares. Apple Inc. and Tesla Inc. helped push up the Nasdaq 100. European futures pointed higher. Australian 10-year bond yields dropped, following the pullback in benchmark U.S. rates from last week’s highs. Oil retreated and the dollar was steady. Bitcoin traded around $55,000, down from a weekend peak above $61,000.

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

7:00 a.m.: Saudi Arabia 4Q GDP Constant Prices
8:45 a.m.: France Feb. CPI
10:00 a.m.: Italy Feb. CPI
11:00 a.m.: Germany, Euro-Area March ZEW Survey
11:00 a.m.: U.K. sells bonds
11:30 a.m.: Germany sells bonds
12:30 p.m.: U.K. sells bonds, ESM sells bills
1:00 p.m.: Turkey sells bonds
1:30 p.m.: U.S. Feb. Retail Sales
5:00 p.m.: Russia Feb. Industrial Production
EU finance ministers meet
EU health ministers meet
Berlin Energy Transition Dialogue conference
Bloomberg Equality Summit

Corporate Events

Earnings include Volkswagen, Partners Group, Ferguson, RWE, Zalando, Crowdstrike, ZTE

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