November 30, 2021

“After the World Health Organisation warned of a “very high” risk of infection surges from Omicron, the dollar dipped again this morning following a significant one-day drop on Friday. The dollar’s fall was compounded by Fed Chair Powell’s announcement that the new variant could cause longer term inflation pressures across the US economy.”

Sam Cornford, Partner & Head of Trading

Main Headlines

Federal Reserve Chair Jay Powell is set to warn the spread of the omicron variant threatens US economic recovery and runs the risk of exacerbating inflation. In remarks prepared for a joint congressional hearing today, the Fed Chair is due to explain that the possibility of coronavirus setbacks could dampen economic prosperity at a time when people are returning to the workforce and consumer demand remains buoyant. The Treasury Secretary Janet Yellen is also due to testify. She will encourage people to get vaccinated and address that if Congress fail to raise the debt limit, they could ‘eviscerate economic recovery.’

HM Revenue & Customs blocked 3,578 claims for furlough money, or £28m total in the first financial year of the UK’s Covid furlough scheme. This figure contrasts with the estimated £5.3bn which was paid out due to fraud and error. The job retention scheme paid out £70bn in wages by the time it closed in September 2021. While the scheme was largely attributed to stopping mass unemployment, figures put 8.7% of all pay-outs in the first year down to fraud and error. Earlier this month, the tax authority revealed that 6.1% of these payouts were due to ‘opportunistic fraud’ while 0.3% were organised crime. HMRC stated that the fraud came from activity that was difficult to detect and pointed to how the scheme has benefited millions of people.

GBP

Sterling is higher against the dollar and weaker against the euro overnight. Following the spread of the new Omicron variant, UK health secretary Sajid Javid announced new measures to tackle the virus yesterday. Boris Johnson will hold a press conference this afternoon where he will present the government’s plan to roll out coronavirus booster vaccines to all adults in the coming weeks. These included a significant expansion of its vaccine booster programme to all adults and halving the gap between the second and third injections. People who are immunocompromised will be offered an additional booster jab. Elsewhere, recent figures from the Office for National Statistics highlight that Northern Ireland has outperformed the rest of the UK and has largely financially recovered from Covid-19. In its third quarter, economic output in the country was only 0.3% lower than the final quarter of 2019.

EUR

The euro is well bid against most major currencies in early morning trade. Figures from the harmonized index of consumer prices highlighted that German inflation rose by 6% in November from a year earlier, adding to pressure on the European Central Bank to explain why it thinks it is still premature to tighten its ultra-loose monetary policy.  Eurozone inflation data is set to be released today, and expected to increase to 4.4% this month, the biggest rise in 13 years. Elsewhere, the EU plans to use €300bn of spending on infrastructure for a Global Gateway plan to rival China’s Belt and Road Initiative. The EU programme are due to set out plans tomorrow and would source their funding from member states, national development banks and European financial institutions by 2027.

USD

The dollar is weaker against most major currencies overnight. The Federal Trade Commission has demanded information from retailers and consumers groups about their supply chains. This comes as the US watchdog investigates supply chain issues and how retailers are handling it. They want to understand whether the crisis has led to an increase in anti-competitive behaviours and how it has impacted factors such as increased prices and availability of transport. Elsewhere, yesterday Biden addressed the nation and emphasised his administration was working with three of the major pharmaceutical corporations to organise plans for additional vaccines or boosters to prevent the spread of the Omicron variant. A Pentagon review of military resources world-wide plans to make improvements to airfields in Guam and Australia to counter China but contains no major reshuffling of forces

Markets

Moderna Inc.’s Chief Executive Officer Stephane Bancel told the Financial Times that existing vaccines will be less effective at tackling omicron. U.S and European equity futures slid along with Asian stocks Tuesday on worries about the efficacy of current vaccines against the omicron strain, doubts that stoked demand for havens including Treasuries. Crude oil tumbled, commodity-linked currencies were in the red, the yen advanced and gold climbed. S&P 500 contracts fell about 1% and the U.S. 10-year Treasury yield sank below the levels hit Friday, when omicron-induced fears for global economic reopening first roiled markets. Risk aversion buffeted cryptocurrencies, with Bitcoin dropping toward $56,000.

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

8:00 a.m.: Turkey 3Q GDP

8:45 a.m.: France Oct. consumer spending, Nov. CPI, 3Q GDP

9:30 a.m.: Norges Bank 4th annual cyber in finance conference

9:55 a.m.: Germany Nov. unemployment change

10:00 a.m. ECB’s Villeroy speaks

10:00 a.m.: Italy 3Q GDP

11:00 a.m.: Riksbank’s Ohlsson speaks

11:00 a.m.: Italy Nov. CPI

11:00 a.m.: Euro-area Nov. CPI

2:00 p.m.: BOE’s Mann speaks at event with Barclays

3:00 p.m.: ECB’s de Cos speaks at Senate’s budget committee

WTO ministerial conference in Geneva

API U.S. oil inventories report

EIA petroleum supply monthly, production report

Corporate Events

Equinor Autumn Conference

Earnings include Salesforce, EasyJet, Wise, NetApp, Allbirds, Zscaler, Ambarella, GlobalFoundries, Hewlett Packard Enterprise, Volvo Car

 

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