Morning Report – Wednesday 16th December

Jon Robson, Head of Trading

“The dollar is under pressure this morning and is once again making multi year lows against a basket of currencies. Expect this trend to continue as global asset prices are well supported going into the holidays”

Main Headlines

British MPs have been put on hold for an extended House of Commons period as there are talks that a Brexit deal could be ready before Christmas. Jacob Rees-Mogg has already made plans to scrap the festive recess period starting on Thursday in a clear sign that MPs will sit next week.

US Congressional leaders are said to have reached a fiscal stimulus compromise after several hours of intense negotiations last night. Mitch McConnell, usually a drag on proceedings, was confident that a deal could be pushed through worth $748 billion, with a special focus to help small businesses.

GBP

The pound is higher against the dollar but is unchanged against the euro. Sterling received a boost last night as Brexit negotiations look to be nearing an end, but Boris is getting pushback from leading scientists that believe that lifting Coronavirus restrictions over Christmas is irresponsible and will significantly increase the death toll. Inflation figures are released today and will likely show a depressed figure of 0.6 percent.

EUR

The euro is higher against the dollar in trading this morning and is near 2-year highs. Eurozone PMIs are released today and the consensus is that the composite PMI will remain in negative territory at 45.7, which would be an increase from November, where most European countries were under lockdown. It would not be too wise reading much into these figures which are predominantly dependent on the stringency of Coronavirus restrictions.

USD

The dollar is lower against a set of major currencies including the Japanese Yen in early morning trading today. The Fed is likely to keep rates on hold in their FOMC meeting this evening, as Jerome Powell has committed to an ultra loose dovish policy, which is unlikely to change until 2024. However he may commit to providing more monetary stimulus as the Coronavirus situation in the US has got significantly worse since the last FOMC meeting.

Markets

Global equities are higher today due to a long awaited compromise on US fiscal stimulus and the S&P 500 closed 1.2% higher last night to break a four day losing streak. Asian equities have also increased on stimulus news, while bond yields are mostly unchanged as investors wait on the FOMC decision tonight and the language used before making any decisions. Oil prices are a touch soft in the session as well.

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

7:00 a.m.: U.K. Nov. CPI, RPI, PPI
8:15 a.m.: France Dec. PMIs
8:30 a.m.: Germany Dec. PMIs
9:00 a.m.: Italy Oct. industrial orders
9:00 a.m.: Euro-Area Dec. PMIs
9:30 a.m.: U.K. Dec. PMIs
10:00 a.m.: Euro-Area Oct. trade
11:00 a.m.: Israel 3Q GDP
3:30 p.m.: EIA Crude Oil Inventory Report
3:30 p.m.: ECB’s Guindos speaks
4:00 p.m.: ECB’s Cos speaks
4:00 p.m.: Russia Nov. PPI
4:15 p.m.: ECB’s Schnabel speaks
7:00 p.m.: FOMC rate decision
7:30 p.m.: Fed’s Powell speaks