November 8, 2021

“The dollar made a steady start to the week in Asia this morning but remained below its peaks on Friday, as traders seek a path between volatile market projections and central bankers vowing a wait-and-see approach despite surging inflation.”

Sam Cornford, Partner and Head of Trading

Main Headlines

The House of Representatives approved Joe Biden’s $1.2tn bipartisan infrastructure bill late on Friday night, in a major victory for the US president following months of Democratic party infighting. In a 228-206 vote, the infrastructure package passed the House, with 13 Republicans joining most of the Democratic caucus. Six progressive Democrats, including Alexandria Ocasio-Cortez and Cori Bush, voted against the measure. The bill, which passed the Senate in August, will now be sent to Biden’s desk to be signed into law. The vote provides a much-needed legislative win for the US president as he grapples with falling approval ratings and Democrats’ losses in several key elections this week, including the Virginia governor’s race.

The UK is pledging £290m to help poorer countries cope with the impact of climate change, as the COP26 climate change summit enters its second week. Government ministers from around the world are in Glasgow for more talks. They will discuss how to support poorer countries and if reparations for damage from natural disasters should be paid. Most of the money from the UK will go to help Asian and Pacific nations plan and invest in climate action, improve conservation and promote low-carbon development. The Foreign, Commonwealth and Development Office described the £290m as “new funding”. The government said last month that cuts to the UK’s foreign aid spending, to 0.5% of national income will stay in place until at least 2024-25.

GBP

Sterling is lower against most majors in overnight trade. The UK is thought to be preparing to suspend parts of the Northern Ireland Protocol, by triggering Article 16. Republic of Ireland’s Foreign Minister, Simon Coveney hinted the EU could terminate the Trade and Cooperation Agreement in response. The U.K., EU and NATO have joined the U.S. in condemning an explosive-laden drone attack early Sunday targeting Iraqi Prime Minister Mustafa al-Kadhimi’s home. In statements, UK Foreign Secretary Liz Truss and NATO Secretary-General Jens Stoltenberg all backed Iraq’s government and security forces and called for a cessation of violence. UK visitors are now able to travel to the US for the first time in nearly two years.

EUR

The euro is lower against the dollar but higher against sterling overnight. Exiting German Chancellor Angela Merkel said she will no longer be involved in politics and will not remain on standby to help out with the crises of the day once she leaves her position at the top of Europe’s largest economy. The ECB’s Chief Economist Philip Lane has stated that surging inflation across the eurozone is a passing problem and not “chronic”, looking ahead to easing supply bottlenecks and a stabilisation of energy prices next year. These comments are meant to set the tone ahead of EU finance ministers meeting in Brussels today to discuss rising costs of living across the bloc.

USD

The dollar is higher against most majors in early morning trade. Biden has laid the foundations to appoint or re-appoint a new Chair of the Federal Reserve amid anxiety around raising interest rates. Incumbent chair Jay Powell met Joe Biden at the end of last week, as the President decides whether to reappoint the top US central banker. Lael Brainard, economist from the Fed’s Board of Governors and Powell’s main rival for the role met with Biden separately. US jobs growth picked up after two straight months of slower gains as pandemic-related concerns eased. Employers added 531,000 jobs and the unemployment rate feel to 4.6% in October.

Markets

Stocks in Asia were steady Monday as investors keep watch on how price pressures impact monetary policy and the pace of economic recovery. Treasury yields rose. Equities slipped in Japan and Hong Kong, while China edged higher. U.S. futures dipped after all major U.S. equity benchmarks climbed to records Friday, with the S&P 500 posting its fifth consecutive weekly rally. That was after a larger-than-forecast and broad-based gain in U.S. payrolls that also showed a jump in average hourly earnings. Australian bonds rallied after the U.S. 10-year Treasury yield tumbled below 1.5% on Friday. Markets will closely watch a read on U.S. consumer prices this week.

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

7:45 a.m.: Switzerland Oct. unemployment rate

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

8:00 a.m.: Finland Sept. trade balance

9:00 a.m.: Czech Republic Sept. industrial output

9:00 a.m.: Hungary Sept. trade balance

10:30 a.m.: Euro-area Nov. investor confidence

12:00 p.m.: Ireland Sept. industrial production

2:00 p.m.: Russia gold and forex reserve

2:10 p.m.: ECB’s Lane speaks at conference on money markets

3:00 p.m.: ECB’s Lane speaks on ECB, Fed monetary policy frameworks

3:00 p.m.: Norway’s Vedum speaks on budget

Bank of Italy report on balance sheet aggregates

Facebook whistle-blower Frances Haugen appears before EU Parliament

Eurogroup ministers meet in Brussels to discuss macroeconomics, inflation

China’s Communist Party plenum starts

Corporate Events

Earnings include SoftBank, PayPal, AMC, Isuzu, Roblox, Yamaha, Tripadvisor, Oak Street Health and Black Knight