November 16, 2021

“The dollar eased broadly against riskier currencies as talks between US and Chinese leaders seemed to have an amicable start. The gulf in tone across the Channel sent the euro on its steepest slide against the pound in six months yesterday as BoE Governor Andrew Bailey told a parliamentary committee he was “very uneasy” about inflation.”

Sam Cornford, Partner and Head of Trading

Main Headlines

President Biden signed his $1tn infrastructure deal into law before a bipartisan, celebratory crowd on the White House lawn, declaring that the new infusion of cash for roads, bridges, ports and more is going to make life “change for the better”. The President hopes to use the infrastructure law to build back his popularity, which has taken a hit amid rising inflation and the inability to fully shake the public health and economic risks from Covid 19. However, the prospects are tougher for further bipartisanship ahead of the 2022 midterm elections as Biden pivots back to more difficult negotiations over his broader $1.85tn social spending package.

Social care workers should receive an immediate bonus of up to £1,000 to stop them quitting before the winter and putting even more pressure on the NHS, ministers are being urged. The ADASS and NHS Providers, which represents hospitals, say emergency payments would help tackle worsening staff shortages. Their plea comes as new figures show that hospitals across the UK cannot fill almost half of the number of consultant posts they advertise. Growing numbers of care home personnel and domiciliary care workers in England are leaving to work in other sectors, leading to warnings that already fragile services may become unsustainable unless the exodus is halted.

GBP

The pound is well bid against most majors in the early morning trade. Wholesale energy prices hit the second highest level in at least three years yesterday, adding pressure on suppliers struggling to secure electricity and gas at competitive rates. Low wind speeds were to blame for pushing wholesale energy prices. The UK’s power grid was forced to turn to gas-fired power plants and coal to make up for the lack of wind power generation, a problem that has exacerbated the energy price crisis that started in August. Demand for energy has rocketed as economies reopen following the coronavirus pandemic, with wholesale prices also under pressure due to lower supplies from Russia to western Europe.

EUR

The euro is stronger than the dollar and weaker than the pound this morning. The EU, yesterday, moved to crack down on a border crisis with Belarus amid fears that Russia may use the cloak of chaos to send troops across its own border. EU foreign affairs ministers agreed to expand the bloc’s existing sanctions on Belarus so they can punish any airlines or officials involved in bringing migrants from their home country to the Belarus-EU border — a ploy the EU calls a “hybrid attack” on the bloc. There are currently several thousand migrants stranded at the Belarus border with Poland, camping in freezing temperatures without consistent access to food and water.

USD

The dollar is lower than most majors overnight. Coal prices in the US surged to the highest in more than 12 years, threatening to bloat America’s already soaring electricity bills and signalling the dirty fuel won’t get phased out anytime soon. Prices for coal from Central Appalachia climbed more than $10 last week to $89.75 a ton on the spot market. That’s the highest since 2009, when a spike in exports boosted domestic prices for the power-plant fuel. With energy demand surging, efforts to reach a deal to completely quit coal’s use failed at the COP26 international climate conference that just ended.

Markets

Asian stocks were steady Tuesday and the yuan climbed as traders weighed the outcome of the first face-to-face virtual summit between U.S. President Joe Biden and Chinese leader Xi Jinping. Treasury yields dipped. MSCI Inc.’s Asia-Pacific share gauge posted a modest advance, while U.S. and European equity futures fluctuated after the S&P 500 and Nasdaq 100 ended flat. Hong Kong outperformed, helped by a rally in Macau casino operators, while Japanese shares edged up. Biden and Xi spoke of the need for cooperation, with both sides aiming to stabilize U.S.-China ties but failing to deliver any big breakthroughs. The yuan approached its strongest level since 2018 on hopes of easing tensions. Gold was at $1,865.30 an ounce, up 0.1%.

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

8:00 a.m.: U.K. Oct. jobless claims, Sept. 3M unemployment rate
8:00 a.m.: Romania 3Q GDP
8:45 a.m.: France Oct. CPI
9:00 a.m.: Hungary 3Q GDP
9:10 a.m.: Riksbank’s Breman speaks
9:30 a.m.: Netherlands 3Q GDP
10:00 a.m.: Italy Oct. CPI
11:00 a.m.: Euro-area 3Q employment, GDP
2:00 p.m.: Hungary rate decision
5:10 p.m.: ECB’s Lagarde speaks at Financi’Elles
Bloomberg Economic Survey for Austria, Belgium, Netherlands, Luxembourg
Bloomberg New Economy Forum convenes in Singapore
IEA monthly oil market report

Corporate Events

Earnings include Walmart, Vodafone, Home Depot, TransDigm, Bouygues, NetEase, Sea, Imperial Brands

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