Morning Report – Wednesday 25th November

Jon Robson – “Global equities continue to surge led by US stocks making all-time highs. The market is awash with liquidity and in the short term there is no obstacle to further gains, this will keep the dollar on the defensive.”

Main Headlines

Rishi Sunak is set to reveal a massive £4.3 billion plan to tackle unemployment caused by the Coronavirus pandemic. Boris Johnson recently ruled out a return to austerity, and the Chancellor said that now is not the time for financial consolidation. Boris Johnson also set out plans for Christmas yesterday, where three bubbles are allowed to mix during the festive period.

President-elect Joe Biden has appointed former Fed Chair Janet Yellen as Treasury Secretary. The move has been welcomed by economists, foreign officials, and markets as they regard her as an experienced policymaker and will likely improve the relationship between the Fed and Treasury which has seen a widening rift in recent times.

GBP

The pound is mostly unchanged against both the dollar and euro this morning. There is surprisingly very little news on the Brexit front, which dominated headlines yesterday, so investors will focus on the Wednesday Spending Review for 2020-21, which will solve the short term problems attached to the pandemic but will likely worsen the already record high fiscal debt problem.

EUR

The euro is trading around 3-month highs against the dollar in early morning trading today. The single currency has recently been trending upwards due to dollar weakness and stagnating Coronavirus cases in the continent. The day is light on the economic data front but two ECB speakers are set to speak today.

USD

The dollar is mostly unchanged against a set of major currencies including the Japanese Yen after declining yesterday. Biden’s pick of Janet Yellen for Treasury Secretary calmed markets and signalled a risk-on mood for assets, so the dollar fell as a result. Today could see more of the same, or the dollar will follow its recent trend of taking stock the day after a day of significant losses. A host of economic data is released today, including initial jobless claims which are expected to fall slightly to 730,000.

Markets

A cocktail of good news in the form of positive vaccine news, Janet Yellen appointed as Treasury Secretary and Donald Trump conceding some power lead US equities to record highs, and the Dow Jones hit the arbitrary 30,000 level. Bond yields rose, while Oil prices rise above $46/ barrel as OPEC+ hinted that they will delay ramping up production.

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

8:00 a.m.: Spain Oct. PPI
9:00 a.m.: ECB’s Holzmann speaks
9:30 a.m.: ECB publishes Financial Stability Review
1:30 p.m.: U.S. Initial Jobless Claims, 3Q GDP, Oct. Wholesale Inventories, Durable Goods
3:30 p.m.: EIA oil inventories

U.K. Spending Review