November 5, 2021

“The dollar remains on course for a second week of gains against major currencies on Friday, against the context of a key US jobs report which could influence the timing of the Federal Reserve’s decision on raising interest rates. Sterling had its worst week since August after the central bank surprised the market by keeping the interest rate steady.”

Tim Hallinan, Trading Director

Main Headlines

US companies will have two months to implement the Biden administration’s new Covid-19 “vaccine or test” mandate or face fines as high as $130,000, officials have announced. The Occupational Safety and Health Administration (Osha) said on Thursday it would begin enforcing the new rules, which will apply to any company with 100 employees or more, from January 4. Joe Biden said in September he would introduce the mandate as coronavirus infection rates climbed and vaccination rates slowed. The US president said it would help protect workers from Covid, although Republican governors have fiercely opposed it, threatening to sue the administration.

The Bank of England Governor Andrew Bailey presented the central bank’s new inflation forecast and decision to hold back on immediately raising interest rates. Bailey, who fuelled expectations of a rate rise last month by saying the BoE must tackle inflation, gave three contradictory messages. First, that the BoE Monetary Policy Committee is much more concerned about inflation than it was previously and interest rates really are going to rise “over coming months”. Second, that it was good to wait and see before taking action because the outlook for economic growth had darkened. Third, that his comments last month about taming inflation had been “truisms”.

GBP

Sterling is higher against the dollar and lower against the euro in overnight trade. France’s Clement Beaune said his meeting in Paris with Brexit minister Lord Frost had been “useful and positive”, but significant differences remained. But there was no breakthrough and there will be more talks next week. Tensions flared last month after the UK and Jersey denied fishing permits to several French boats. France has threatened to stop British trawlers from landing their catches at French ports unless more permits are granted in return covering UK waters. The topic of fishing licences for 200 French boats is a key point of negotiation, whilst Boris Johnson’s official spokesman said the French government had given assurances that hostile threats against British boats would cease.

EUR

The euro is well-bid against most majors overnight. Portuguese President Marcelo Rebelo de Sousa on Thursday called a snap election for January 30, after the minority Socialist government was defeated in a key budget vote last week. The election comes at an awkward time for Portuguese politics, with the rupture of the loose left-wing alliance that has kept Prime Minister António Costa in power since 2015 and the centre-right opposition in disarray. The European region is now the “epicenter” of the global pandemic and is on a trajectory to see another half a million deaths this winter, the head of the World Health Organization’s Europe region warned Thursday. Tom Vennink, Russia correspondent for the Dutch newspaper de Volkskrant, has been thrown out of the country by Russian authorities over “administrative violations.”

USD

The dollar is lower against most majors in early morning trade. An indictment returned in federal court on Thursday casts doubt on the sources of a series of salacious and largely discredited reports about former President Donald Trump and Russia that the FBI ultimately used in support of a counterintelligence investigation into his 2016 campaign and associates. Russian-born Igor Danchenko was charged with five counts of making false statements to officials of the Federal Bureau of Investigation about the sources of the information he helped compile for Christopher Steele’s dossier.

Markets

Asian stocks dipped Friday and U.S. futures were steady as a global equity rally paused. Sovereign bonds held gains after investors scaled back expectations for monetary policy tightening to quell inflation. Shares fell in Japan and Hong Kong, where developer Kaisa Group Holdings Ltd. and its Hong Kong-listed units were suspended from trading in the latest sign of stress from China’s troubled property sector. S&P 500, Nasdaq 100 and European futures fluctuated after tech shares led Wall Street to a record high. Treasuries held a climb. A surprise Bank of England move to hold interest rates spurred a global surge in bonds as investors reviewed the outlook for borrowing costs. Interest-rate futures had priced in two quarter-point Federal Reserve increases in 2022 but shifted the second one toward 2023. Jerome Powell this week said the Fed can be patient on hikes. Crude oil advanced.

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

8:00 a.m.: Germany Sept. industrial production

8:45 a.m.: France Sept. industrial production

9:00 p.m.: Switzerland Oct. foreign currency reserves

10:00 a.m.: ECB’s Centeno, Santander’s Simoes, Euronext CEO at conference

10:00 a.m.: Norges Bank’s Olsen speaks

11:00 a.m.: Euro-area Sept. retail sales

12:00 p.m.: ECB’s Panetta speaks

1:15 p.m.: BOE’s Ramsden, Pill speak

1:30 p.m.: U.S. nonfarm payrolls, jobless rate

2:00 p.m.: BOE’s Tenreyro speaks at IMF conference

2:30 p.m.: ICE Futures Europe traders report

3:30 p.m.: Turkey Oct. cash budget balance

4:30 p.m.: CFTC traders data

Holiday in Russia

COP26 youth and empowerment agenda day

France, Italy, Denmark sovereign debt ratings

Corporate Events

Earnings include Alibaba, Honda, Mitsubishi, Draft Kings, Canopy Growth, Goodyear, Dominion Energy, Magna, Hill-Rom, TransCanada, Kimco

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