November 3, 2021

“The dollar held close to its annual peak against the euro and the yen on Wednesday, as investors looked to the federal reserve to taper it’s asset purchasing pandemic-era policy support faster than central banks in Europe and Japan.”

Tim Hallinan, Trading Director

Main Headlines

At this week’s Federal Open Market Committee Meeting, the Federal Reserve will announce a scaling back of its enormous pandemic-related stimulus programme amid uncertainty caused by persistent inflationary pressures and whether the US central bank will need to raise interest rates sooner than expected. Members of the Federal Open Market Committee and other Fed officials have for months engaged in an extensive debate over choosing the ideal moment to start tapering the $120bn monthly asset purchase programme. The scheme was put in place last year to address difficult trading conditions in the $22tn US government bond market and to support the economy during the economic turbulence of Covid-19.

A coalition led by Mark Carney, the former governor of the Bank of England, has signed up to tackle climate change by committing $130tn of private capital to attempt to hit net zero emissions targets by 2050. The Glasgow Financial Alliance for Net Zero (Gfanz) — which is made up of more than 450 banks, insurers and asset managers across 45 countries — said it could deliver as much as $100tn of financing to help economies transition to net zero over the next three decades. The total capital figures put forward by the Gfanz drew scepticism, however, from some climate campaigners that track the financial services industry.

GBP

Sterling is strong against most majors in overnight trade. Most big UK firms and financial institutions will be forced to show how they intend to hit climate change targets, under proposed Treasury rules. By 2023, they will have to set out detailed public plans for how they will move to a low-carbon future – in line with the UK’s 2050 net-zero target. Plans will be submitted to an expert panel to ensure they are not just spin. “Broken” military procurement practices at the UK Ministry of Defence have repeatedly resulted in billions of pounds of taxpayer money being wasted, according to the House of Commons Public Accounts Committee.

EUR

The euro is higher against the dollar and lower against sterling. A press leak of a text message sent by French President Emmanuel Macron to Australian Prime Minister Scott Morrison is an “unprecedented new low” in the relationship between the two countries, according to France’s ambassador in Canberra, Jean-Pierre Thébault. Having tasted defeat in the Bundestag elections, Germany’s CDU has decided to part with Armin Laschet as party leader, who had followed in the wake of Angela Merkel’s 16 years in power. For the first time, the CDU leader will be chosen via a vote of all party members. Possible candidates include Friedrich Merz a former senior CDU MP, as well as Health Minister Jens Spahn and foreign policy specialist Norbert Röttgen.

USD

The dollar is lower against most majors in early morning trade. Republican Glenn Youngkin was elected governor of Virginia on Tuesday, halting a long trend of Democratic electoral gains in the state and giving the GOP a potential playbook in competitive parts of the U.S. ahead of next year’s congressional midterm elections. The Centers for Disease Control and Prevention recommended use of the Pfizer-BioNTech Covid-19 vaccine among children ages 5 to 11 years, opening the door for immunizations to start. The endorsement, by CDC Director Rochelle Walensky on Tuesday, was the last step before doctors, nurses and pharmacists could start giving the shots.

Markets

Most Asian stocks slipped Wednesday amid a warning about China’s growth outlook and as traders braced for the Federal Reserve policy decision. Oil fell with the U.S. pressuring OPEC+ to boost supplies. Shares were lower in Hong Kong and China in the wake of Premier Li Keqiang’s warning that the world’s second-largest economy faces new downward pressures. The nation is also grappling with its most widespread coronavirus outbreak since the pathogen emerged in Wuhan in 2019. An iron-ore rebound bolstered commodity-reliant Australia. Japan was shut for a holiday. S&P 500, Nasdaq 100 and European futures edged down following fresh peaks for U.S. shares. Wall Street has been buoyed by the resilience of company profits to rising costs from supply chain and labour disruptions.

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

7:00 a.m.: Russia Oct. services, composite PMI
8:00 a.m.: U.K. Oct. nationwide house prices
8:00 a.m.: Turkey Oct. CPI
8:45 a.m.: France Sept. budget balance YTD
9:00 a.m.: Spain Oct. unemployment change
9:00 a.m.: ECB’s Elderson speaks at COP26
9:00 p.m.: Genscape Europe ARA crude inventory report
10:30 a.m.: U.K. Oct. services PMI
11:00 a.m.: Euro-area Sept. unemployment rate
2:00 p.m.: ECB’s Villeroy speaks
5:00 p.m.: Russia Oct. CPI
Poland base rate announcement
EIA crude oil inventory report
FOMC rate decision
COP26 finance agenda day

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