Morning Report

Tuesday 18 May, 2021

“The dollar came back under pressure as Treasury yields stalled amid renewed expectations that the Fed’s loose monetary policy will stay in place. The gradual lifting of strict coronavirus restrictions in the UK has been cheered by market participants and supported the pound, although the prospect of delay to further reopening could result in a tumbling sterling.”

Sam Cornford, Senior FX Dealer

Main Headlines

The Biden administration moved to sharply ramp up Covid-19 vaccine shipments to other countries, vowing to provide an “arsenal of vaccines for the rest of the world”. An earlier pledge to export 60 million doses of the vaccine from AstraZeneca PLC came with little sacrifice because that vaccine has yet to be authorized for U.S. use. The U.S. now plans to share globally 20 million doses of vaccines produced by Moderna Inc., Pfizer Inc. and Johnson & Johnson, all of which are being used in the U.S. Delivery of the AstraZeneca vaccine doses will be contingent on a Food and Drug Administration review of product-quality standards, the White House said.

The U.K. labour market strengthened more than expected in April as the economy began to emerge from coronavirus restrictions. The number of people on payrolls rose 97,000, and vacancies increased 13%. The jobless rate in first quarter fell unexpectedly to 4.8% as employment surged 84,000, the first gain since the pandemic struck. The jobs outlook has improved significantly in recent months, shifting the debate towards when the Bank of England will start tightening monetary policy. Peak unemployment expectations for the third quarter have now been updated to just 5.4% from a previously estimated 7.9%.


Sterling is stronger against most majors this morning. Authorities have identified 2,323 cases of the Indian strain of coronavirus in the U.K. Health secretary Matt Hancock has set out plans to combat the fast-spreading coronavirus variant in England, doubling down on a strategy to get jabs into the arms of the most vulnerable. The Bank of England will add negative rates to its policy toolkit starting in August, according to policy maker Gertjan Vlieghe. He said the economy needs “a lot of stimulus,” and the inflation is likely to rise above the central bank’s 2% target later this year.


The euro is higher versus the dollar and lower versus the pound overnight. Brussels has agreed to shelve plans to boost tariffs on a range of US products as the two sides seek a resolution to a longstanding stand-off over the steel and aluminium sectors. The two sides have now given themselves until the end of the year to engage in discussions about the oversupply of steel resulting from production in countries including China.


The dollar is offered against most majors in early morning trade. Biden voiced support for a cease-fire in a call with Israeli Prime Minister Benjamin Netanyahu, reiterating “his firm support for Israel’s right to defend itself against indiscriminate rocket attacks.” Earlier on Monday, the U.S. blocked a proposed UN Security Council statement that would have condemned the violence and called for a cease-fire. The Democrats are split over the conflict in Gaza, with the progressives putting pressure on the president to take a tougher stance on Israel’s treatment of Palestinians.


Asian stocks and U.S. futures rose Tuesday with investors weighing the pace of growth as economies reopen against a pick-up in virus cases in the region. Taiwan outperformed, jumping as much as 5.2%, as the financial stabilization fund said it was monitoring stocks after the worst rout in more than a year and data showed foreign investors had continued buying during the selloff. Japan and Hong Kong paced gains in a gauge of the region’s stocks. Earlier, technology and communication services stocks led U.S. stocks lower as volatility ticked up. European futures climbed. Treasuries were stable after retreating. Oil was up marginally and near a two-year high amid optimism around a demand recovery in regions such as the U.S., even as coronavirus flares up in parts of Asia.

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

10:00 a.m.: ECB’s Villeroy speaks

11:00 a.m.: Euro-Area 1Q GDP, employment

11:00 a.m.: U.K. sells bonds

11:30 a.m.: Germany sells bonds

12:00 p.m.: Israel 1Q GDP

12:30 p.m.: U.K. sells bonds, ESM sells bills

1:00 p.m.: Turkey sells bonds

4:00 p.m.: BOE’s Bailey, Broadbent, Ramsden speak

6:00 p.m.: Russia April PPI

EU finance ministers meet

France’s Macron hosts the Summit on Financing African Economies in Paris

Corporate Events

The IFC and EMPEA annual Global Private Equity Conference

Earnings include Generali, Imperial Brands, Walmart, Home Depot

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