October 11, 2021

“The U.S. dollar ticked up to a 2 and half year high against the yen on Monday after soft US payrolls figure meant expectations for tapering were not damaged. The US economy created the fewest jobs in nine months, but the Federal Reserve still looks set to end its massive bond-buying program next month.”

Tim Hallinan, Trading Director

Main Headlines

The U.S. economy is facing rising energy prices. Crude oil has risen 64% this year to a seven-year high. Natural-gas prices have roughly doubled over the past six months to a seven-year high. Heating oil has risen 68% this year. Prices at the pump are up nearly a dollar over the past 12 months to a national average just over $3 a gallon. Coal prices are at records. Higher energy prices could push up inflation in coming months, damp consumer spending on other products and services, and ultimately slow the U.S. recovery. Energy prices are volatile at the best of times, however, a squeeze on natural gas and oil supplies is likely to push inflation in the months to come.

The UK and EU have edged closer to a trade war over London’s demands for a comprehensive rewriting of the NI Protocol.  The EU stated that the ECJ’s oversight role of the Northern Ireland Protocol was a ‘red line’ which it would not agree to remove, whilst David Frost, the UK’s representative reiterated that this demand is not new one. The U.K. will push for “significant” changes to the Northern Ireland Protocol, saying they will ease tensions and prevent conflicts arising from the Good Friday agreement. The EU has said it won’t renegotiate the deal but can make adjustments. Raising the temperature, Irish foreign minister, Simon Coveney accused the UK on Twitter of setting a new red line just days before the EU was set make concessions.

GBP

Sterling is well-bid against most majors overnight. Foreign Secretary, Liz Truss, is planning a refocused UK foreign policy, pursuing stronger diplomatic and trade ties with a smaller number of allies, using instruments in the style of the AUKUS submarine deal. The foreign secretary will visit the main capitals in the EU to reset the UK’s relationship with Europe in the months to come. UK education and business leaders have urged government ministers to expand a foreign visa scheme for foreign workers to help fill key jobs or risk the economic recovery. A joint letter to four ministers including Kwasi Kwarteng, business secretary, a consortium of businesses requested extensions to short term measures to tackle supply chain challenges and labour shortages.

EUR

The euro is lower against sterling and higher against the dollar. ECB governing council member Francois Villeroy de Galhau said he expects inflation in the euro area to peak in coming months, spurred by rising energy costs, before the pace of price increases slips back below 2% by the end of 2022. Sebastian Kurz resigned as Austria’s chancellor on Saturday in the face of corruption allegations, a blow for a rising star of European conservative politics. Foreign Minister Alexander Schallenberg is expected to be Austria’s next chancellor and may be sworn in today. In the Czech Republic, President Milos Zeman was hospitalized in intensive care, hours after his closest ally, PM Andrej Babis, suffered a shock election loss.

USD

The dollar is lower against most majors in early morning trade. A U.S. Navy nuclear engineer and his wife have been charged with selling secret information about nuclear submarines to an undercover FBI agent who posed as an operative for a foreign country, the Justice Department said on Sunday. Jonathan Toebbe and his wife, Diana, were arrested on Saturday in West Virginia and charged with violating the Atomic Energy Act, the Justice Department said in a statement. The House select committee investigating the deadly assault on the US Capitol on 6 January is prepared to urge federal prosecution of former aides to Donald Trump who refuse to comply with subpoenas.

Markets

Asian stocks climbed Monday, helped by rallies in Japan and Chinese technology shares, while crude oil surged past $80 a barrel amid a global energy crunch. Japanese shares were boosted by a weaker yen and Prime Minister Fumio Kishida’s comments that he isn’t considering capital-gains tax changes at present. A Hong Kong gauge of Chinese tech equities jumped more than 3% on easing concerns about Beijing’s crackdown on internet platforms after food delivery giant Meituan received a lower-than-expected antitrust fine. U.S. futures fell after Wall Street declined Friday on disappointing jobs growth data that also showed a jump in earnings. Wage gains and higher energy costs are stoking inflation and supporting the case for tighter monetary policy to tackle inflation, including a looming reduction in Federal Reserve stimulus.

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

8:00 a.m.: Norway Sept. CPI

9:00 a.m.: ECB’s Villeroy speaks

9:00 a.m.: Turkey Aug. current account balance

10:00 a.m.: Italy Aug. industrial production

10:00 a.m.: ECB’s Centeno, Elderson and Carney at online conference

10:30 a.m.: Bank of Italy releases banks and money statistics

11:30 a.m.: Germany to sell bills

11:45 a.m.: Nobel Prize in Economics is announced

2:00 p.m.: ECB’s Lane speaks

2:30 p.m.: ECB’s Lane speaks

2:50 p.m.: France to sell bills

3:00 p.m.: Russia 3Q current account balance

4:00 p.m.: ECB’s Holzmann speaks

4:45 p.m.: ECB’s Elderson speaks

5:30 p.m.: ECB’s De Cos speaks

6:00 p.m.: Riksbank’s Jansson in panel discussion

Winner of the Czech elections

IIF annual meeting starts; speakers include CEOs of Santander, JPMorgan, BlackRock and BofA

IMF, World Bank annual meetings start in Washington

U.S. bond markets are closed

Results of Iraq’s election

Corporate Events

Earnings include Industrivarden

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