Morning Report

Tuesday 25 May, 2021

“Higher regional equity markets undermined the safe-haven allure of the currencies. The Federal Reserve’s reassurance that policy would not change soothed investor concerns about inflation forcing interest rates higher. These factors have been sustaining the continuing dollar retreat.”

Sam Cornford, Senior FX Dealer


The G7 are close to agreeing a pact on the corporate taxation of multinationals, paving the way for a global deal later in the year to create new rules for the imposition of levies on the world’s largest companies. A Group of Seven pact could be sealed as early as Friday. A pact would be a prerequisite for a deal in the formal negotiations taking place at the OECD in Paris and directed by the wider G20. The US has been pushing hard for the G7 to reach its own consensus as a way of spurring the OECD talks, scaling back the tax proposal from 21 per cent to an effective rate of 15 per cent.

The UK posted a £31.7 billion budget deficit in April. The shortfall reported by the Office for National Statistics Tuesday was in line with the median forecast of economists but well below the 47.3 billion pounds registered in April last year. Chancellor Rishi Sunak faces a task to rein in the deficit, which hit a peacetime high of 14.3% of GDP in the last fiscal year. Borrowing in 2021-22 is still expected to total more than £200 billion, or 10% of GDP, and there are doubts that Sunak can deliver on his pledge to balance day-to-day spending and revenue by the middle of the decade without further tax increases.


The pound is higher against most majors overnight. The UK government has unveiled proposals for a major shake-up of workplace pension charges to make them clearer, but conceded the change may leave some savers worse off. Ministers plan to ban combination charging models for pensions and instead impose a single charging structure across the auto-enrolment market. Experts said the move would likely pave the way for further reforms that would give the 29m workers on such schemes more freedom to switch to better value retirement plans.


The euro is stronger against  the dollar and weaker against the pound overnight. EU leaders agreed to impose new sanctions on Belarus and ban its national airline from the bloc’s airspace and airports after Minsk intercepted a Ryanair flight to arrest an opposition activist. European leaders agreed to targeted economic measures be aimed at companies and people accused of financing President Alexander Lukashenko. In other news, European Union leaders dismissed British demands to amend the terms of the Brexit withdrawal agreement, setting the stage for further tension over Northern Ireland.


The dollar is lower against most majors in the early morning trade. Fed officials Lael Brainard, Raphael Bostic and James Bullard said they wouldn’t be surprised to see bottlenecks and supply shortages push prices up in coming months as the pandemic recedes, but that much of those gains should be temporary. The US is to impose sanctions on Ethiopian and Eritrean officials “responsible for perpetrating” a brutal war in the Tigray region, amid growing international pressure to end the conflict.


 Asian stocks and U.S. equity futures rose Tuesday following a Wall Street rally. MSCI Inc.’s Asia-Pacific equity index was set for the highest close in about two weeks. China’s CSI 300 gauge surged about 3% following Beijing’s efforts to talk down raw material costs. European and U.S stock futures climbed after the S&P 500 advanced and the Nasdaq 100 outperformed overnight. Treasury yields held a retreat. Oil retained the biggest two-day gain since March as investors tracked a recovery in demand that may enable the market to accommodate any fresh flows from Iran should the nation’s nuclear deal be revived.

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

8:00 a.m.: Germany 1Q GDP

8:00 a.m.: U.K. April Public Finances

10:00 a.m.: Germany May Ifo Survey

11:30 a.m.: Germany sells bills

12:00 p.m.: U.K. May CBI Retailing Reported Sales

1:00 p.m.: Turkey sells bonds

2:00 p.m.: Hungary rate decision

2:50 p.m.: France sells bills

3:00 p.m.: ECB’s Villeroy speaks

4:00 p.m.: ECB’s Lane speaks

6:00 p.m.: BOE’s Tenreyro speaks

6:00 p.m.: Russia April industrial production

EU MARS bulletin

Slovenia lawmakers debate and vote on whether to impeach premier Janez Jansa

Bloomberg Live presents The Future of Sustainable Investing

Corporate Events

Earnings include Alibaba Health, Kingsoft, Huazhu, Technology One, Intuit, Zscaler, Heico, Toll Brothers, Nordstrom

To learn more about Ballinger & Co., please visit our website or our LinkedIn and Twitter pages.