October 12, 2021

“The US dollar index was not far from its one-year high it touched at the end of September, as traders positioned themselves for the Fed to announce a tapering of its massive bond buying programme in November. This would also raise the possibility of US interest rate hikes in late 2022, and hunt for the best yields was a dominant factor behind the dollar’s gains.”

Sam Cornford – Partner, Head of Trading

Main Headlines  

In the US, new coronavirus cases have fallen 21% in the last two weeks and some experts have suggested this could mark the start of a shifting course after nearly four months of ever-worsening case totals. This week, the University of Washington’s Institute for Health Metrics and Evaluation, which puts out a predictive model that is widely used for planning, released a projection saying new cases in the United States would decline steadily from now on. However, health officials are growing increasingly concerned that quickly circulating variants of the virus could cause new surges of cases faster than the country is managing to distribute Covid-19 vaccines.

British shoppers increased their spending in September at the slowest pace since January, when the country was stuck in a coronavirus lockdown, as they worried about a shortage of fuel, according to a survey published on Tuesday. The British Retail Consortium said retail spending lost more momentum last month, rising by just 0.6% compared with September 2020, much weaker than August’s 3.0% increase. Much of the country saw panic-buying of fuel last month as a shortage of tanker drivers led to disruption of supplies. The government has blamed this on problems facing the global economy as it reopens after lockdown, but critics say it also reflects Britain’s tougher post-Brexit immigration rules.

GBP 

Sterling is higher than the dollar but lower than the euro in the early morning trade. British airline EasyJet said travel was back and it would fly to 70% of its pre-pandemic capacity in the Oct-Dec period, higher than it planned last month, after COVID-19 restrictions drove losses above 1 billion pound loss in 2021. Demand for holidays to winter sun destinations such as Egypt, Turkey and the Canary Islands showed customer appetite had returned, said easyJet, adding that business travellers were also booking flights. “We are encouraged to see positive booking momentum into full-year 2022 which has led us to increase our capacity plans,” easyJet chief executive Johan Lundgren. EasyJet also recently launched a surprise 1.2 billion pound rights issue and revealed it had rejected an “opportunistic” bid from a suitor, believed to be Wizz Air.

EUR

The euro is stronger than most majors this morning. Two dozen countries have joined a U.S.- and EU-led effort to slash methane emissions 30% by 2030, giving the emerging global partnership momentum ahead of its launch at the U.N. climate summit in Glasgow later this month. Nigeria, Japan and Pakistan are among the 24 new signatories to the Global Methane Pledge, which was first announced by the United States and EU in September with the aim of galvanizing rapid climate action before the start of the Scotland summit on Oct. 31. It could have a significant impact on the energy, agriculture and waste sectors responsible for the bulk of methane emissions. The US is due to release oil and gas methane regulations in the coming weeks, and the EU will unveil detailed methane legislation later this year.

USD

The dollar is lower than most majors overnight. Three US economists won the Nobel prize for economics for pioneering research that showed an increase in minimum wage does not lead to less hiring and immigrants do not lower pay for native-born workers, challenging commonly held ideas. The award was also won for creating a way to study these types of societal issues. Canadian-born David Card of the University of California, Berkeley, was awarded half of the prize for his research on how minimum wage, immigration and education affect the labor market. The other half was shared by Joshua Angrist from the Massachusetts Institute of Technology and Dutch-born Guido Imbens from Stanford University for their framework for studying issues that can’t rely on traditional scientific methods. The Royal Swedish Academy of Sciences said the three have “completely reshaped empirical work in the economic sciences.”

Markets

Stocks and U.S. equity futures fell Tuesday, hurt by concerns about elevated inflation stoked by energy costs and the possibility of a widening regulatory crackdown in China. MSCI Inc.’s Asia-Pacific index snapped a three-day climb, with the technology sector leading losses and China underperforming. Signs that Beijing is widening its scrutiny of private and state enterprises soured the broader mood. S&P 500, Nasdaq 100 and European futures retreated following declines on Wall Street as the prospect of a slowing recovery from the pandemic shadowed trading. Oil held above $80 a barrel amid a power crisis from Europe to Asia. China’s thermal coal futures surged to a record for a second day. The energy crunch is squeezing supplies of aluminum, whose price hit a 13-year high. Other industrial metals have also rallied, fueling inflationary pressures. Gold was at $1,761.01 an ounce, up 0.4%.

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

8:00 a.m.: U.K. Sept. jobless claims; Aug. 3-month unemployment rate
8:00 a.m.: Norway publishes key budget figures
9:00 a.m.: Turkey Aug. industrial production
10:00 a.m.: Norway national budget 2022
10:00 a.m.: Netherlands to sell bonds
11:00 a.m.: Germany Oct. ZEW expectations
11:00 a.m.: Euro-area Oct. ZEW expectations
11:00 a.m.: Italy, Finland, Hungary to sell bills
11:00 a.m.: U.K. to sell bonds
11:00 a.m.: ECB’s Makhlouf speaks
11:15 a.m.: Switzerland to sell bills
11:30 a.m.: Germany to sell bonds
12:30 p.m.: ESM to sell bills
1:00 p.m.: Austrian Parliament special session on Kurz investigation
1:30 p.m.: ECB’s Knot speaks at IIF
1:45 p.m.: ECB’s Villeroy speaks
2:30 p.m.: ECB’s Lane speaks
3:00 p.m.: ECB’s Elderson speaks
3:00 p.m.: ECB’s Lagarde gives speech
IMF publishes World Economic Outlook, Global Financial Stability Report
G-20 trade ministers meet in Sorrento, Italy

Corporate Events 

Earnings include Fastenal, LG Electronics, Tryg

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