Morning Report – Wednesday 18th November

Main Headlines

Boris Johnson will set out details on a new £12 billion green package, which will create or support up to 250,000 jobs. Perhaps, the most critical element of the plan is to ban diesel cars by 2030. The Prime Minister has told Conservatives that this will not cost votes in former Labour strongholds. This could be seen as a ploy to get Joe Biden onside, as the President-elect has recently spoken against Johnson, and his illegal internal market bill.

Judy Shelton’s Fed nomination was blocked by the Senate in a hearing yesterday, which delivered another blow to Donald Trump, who pushed for the fierce critic of the central bank. Trump also fired Chris Krebs, a top US election official after he said that the election was the “most secure” in American history. Time is running out for Trump to find any evidence to support his baseless claims, as another of his legal disputes in Pennsylvania was thrown out.

In an Economic forum, hosted by Bloomberg yesterday, Christine Lagarde said that the focus of monetary stimulus should be on its design not its size. This is a signal that the €1.35 trillion bond-buying programme will be the main tool of the ECB, and further stimulus may not be forthcoming. Lagarde also said that recent vaccine news was not a “gamechanger” and it does not change the ECB forecasts as they expected a vaccine in some form in the first few months of 2021.

GBP

The pound is rising against the dollar and is unchanged against the euro in early morning trading today. Inflation data came in a touch higher than expectations, but this will have little effect on markets, which will be focused on Brexit discussions continuing this week. There are reports that we could see a trade deal as early as next Tuesday but given a history of false starts reported in the media, this must be taken with a pinch of salt.

EUR

The euro was firm against the dollar overnight. Euro area inflation released later this morning should come in at around -0.3% in line with expectations. Another ECB speaker in Andrea Enria speaks today on what is a busy week for ECB officials, and investors will focus on mulling over Lagarde’s comments in the Economic forum yesterday.

USD

The dollar is losing ground against most major currencies, including the Japanese Yen in early morning trading as broad-based dollar weakness continues. Nancy Pelosi and Mitch McConnell are set to resume fiscal stimulus talks again this week with the value to be much less than proposed before the US election, given the Republicans retained the Senate. Housing starts are also expected to increase for October.

Markets

US equity futures have dipped this morning as investors weigh up rising Covid-19 cases in the US, and take a pause from the record high seen after the Moderna vaccine announcement on Monday. There has also been a growing move away from growth stocks into value stocks. Oil and gold prices are mostly unchanged, but treasury yields have fallen which indicates that investors are still somewhat nervous about economic conditions. Bitcoin is quickly approaching record highs seen almost three years ago.

Expert Comment – Jon Robson, Head of Trading

We are hearing rumours of a UK-EU trade deal being announced as early as next week. Sterling is well supported in anticipation of this long-awaited agreement. It would now be a shock to the market if this did not come to fruition.

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

7:00 a.m.: U.K. Oct. CPI, RPI, PPI
7:00 a.m.: Oct. EU27 New Car Registrations
8:15 a.m.: ECB’s Enria speaks
8:55 a.m.: Iceland Rate Decision
9:30 a.m.: U.K. Sept. Home Price Index
10:00 a.m.: Euro-Area Oct. CPI
10:30 a.m.: BOE’s Haldane speaks
3:30 p.m.: EIA weekly U.S. oil inventory report
4:00 p.m.: Russia Oct. PPI

Zambia Rate Decision