Morning Report

Morning Report – Tuesday 23 February

Jon Robson, Head of Trading

“The dollar is nursing losses near a six-week low as market participants overwhelmingly bet that the greenback will depreciate further. Sterling is the best performing currency in 2021 and the pound rally may now have fresh legs, as the U.K.-euro area monetary path diverges.”

Main Headlines

Jerome Powell will testify before Congress today and tomorrow. He’s expected to reaffirm his commitment to an ultra-easy stance, with the labour market far from full employment and inflation below target. However, traders will watch for signs the Fed is troubled by rising long-term borrowing costs and rallying commodities.

U.K. unemployment climbed to its highest rate in almost five years in the fourth quarter as the economic toll from the coronavirus pandemic continued to mount. The number of people looking for work rose 121,000 from the third quarter, taking the jobless rate to 5.1%, the most since early 2016, the Office for National Statistics said Tuesday. Chancellor of the Exchequer Rishi Sunak said he will use his budget on March 3 to extend government support programs due to expire in the coming weeks.


Sterling is higher against most major currencies this morning. The Association of British Insurers called on the UK government to water down Solvency II, the EU’s insurance capital regime, in what would be the first major departure for the financial sector from Brussels’ rule book since Brexit. Meanwhile, Boris Johnson laid out a “one-way road to freedom” for England, setting out a “cautious” and “data driven” strategy for restoring normal life and economic activity by June 21.


The euro is stronger against most major currencies overnight. Thousands of European manufacturers have been hit by a surge in the price of polymer resins used to make plastic. Polyethylene and polypropylene prices have risen 25 per cent since December, to their highest level since 2015 because of strong demand and a slump in supplies. Extra costs may be passed to supermarkets if prices remain elevated and margins of companies that convert plastic resins into household and industrial products may suffer.


The dollar is lower versus most major currencies in the early morning trade. President Biden’s nomination of Neera Tanden’s for the role of the White House budget director is in jeopardy after two centrist Republican senators signalled their opposition to her confirmation, in a blow to the President’s efforts to fill a key economic post. A delay in the confirmation of the budget director, a cabinet-level position, could hamper Biden’s economic agenda by delaying its plans to draw up a full budget with its top legislative priorities for the fiscal year.


Hong Kong stocks outperformed, while Japan was shut for a holiday. S&P 500 contracts climbed and European futures dipped after the U.S. index fell a fifth day. The Nasdaq 100 tumbled more than 2% on Monday as investors questioned the appeal of costlier equities after the climb in long-term borrowing costs. Treasuries were steady after the gap between 5- and 30-year yields touched the highest level in more than six years. Oil rose toward $63 a barrel with investment banks and traders predicting the market will tighten further. Gold added was at $1809.76 an ounce.

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

8:30 a.m.: Switzerland Jan. Producer Prices

9:00 a.m.: Austria Jan. CPI

9:00 a.m.: Riksbank’s Breman speaks

9:00 a.m.: Czech Jan. PPI

9:30 a.m.: Sweden Jan. Unemployment

10:00 a.m.: Italy Dec. Industrial Orders

10:00 a.m.: Netherlands to sell bonds

11:00 a.m.: Euro Area Jan. CPI

2:00 p.m.: Hungary Rate Decision

Iran to curb international nuclear inspections

EU European Affairs ministers meet in Brussels to discuss U.K. relations

Margrethe Vestager to speak on digital regulations at the European Parliament.

Jerome Powell testifies before Congress

International Petroleum Week

U.S. FHFA house price index

Corporate Events

Earnings include Home Depot, Macy’s, Medtronic, Alcon, Genmab

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