Morning Report – Wednesday 16th September

Main Headlines

Boris Johnson has held talks with rebels in the U.K.’s ruling Conservative Party in an attempt to win their backing for his controversial law rewriting part of the Brexit deal he struck with the European Union last year. The prime minister is facing a revolt from Tories dismayed at his plan to break international law by unilaterally re writing parts of the Brexit Withdrawal Agreement.

FTSE 100 futures fell, while Asian stocks were little changed ahead of the Fed decision. Japanese shares edged higher after Yoshihide Suga was confirmed as the nation’s new PM. U.S. futures rose, reversing earlier losses. WTI and Brent climbed more than 1% after the API was said to report U.S. crude stockpiles fell 9.52 million barrels last week. Treasuries slipped and gold rose.

Donald Trump hailed the historic signing of diplomatic ties between Israel, the UAE and Bahrain in a White House ceremony. The president said the three countries would exchange embassies and boost cooperation in tourism, trade and security. He also predicted other countries in the region will join the accords, including the Palestinians “at the right time.”

China’s policy makers are in no rush to rein in a rapid advance in the yuan, as traders push the currency toward its largest quarterly rally on record. The yuan has strengthened 4.3% since the end of June to 6.7730 per dollar, set for the biggest ever quarterly gain in Bloomberg data going back to 1981. The currency is the best performer in Asia in the third quarter, with the buying momentum being close to the strongest since January.

GBP

The pound has been rising from last week’s lows with better than forecast jobs figures overnight and opposition to a plan to breach the Brexit treaty. Bank of England officials are expected to lay the groundwork this week for yet more monetary stimulus as optimism over the U.K.’s economic rebound from the coronavirus pandemic fizzles out. While economists and investors don’t see immediate action, they widely predict the BOE’s bond-buying program will be expanded again before the end of the year. The latest policy decision, released on Thursday, will likely back that view.

EUR

EU Commission President Ursula von der Leyen will deliver her first annual State of the Union address, where she is expected to comment on deteriorating Brexit talks, relations with China, and the region’s recovery from the pandemic.

USD

The dollar found support overnight as traders positioned themselves ahead of a U.S. Federal Reserve policy decision. Later, the Fed is highly likely to leave rates untouched, while updating its economic projections and forward guidance on monetary policy. The officials are expected to project rates staying near zero though 2023.

Main Economic Data/Central Banks/Government (All times BST)

7:00 a.m.: U.K. Aug. CPI, RPI, PPI
9:30 a.m.: U.K. June House Price Index
10:00 a.m.: Euro-Area July Trade Balance
3:30 p.m.: EIA Crude Oil Inventories
4:00 p.m.: ECB’s Holzmann speaks
5:00 p.m.: Russia Aug. PPI
7:00 p.m.: FOMC Rate Decision

OECD presents new economic forecasts
U.K.’s Johnson cross-examined by Parliament’s liaison committee