October 18, 2021

“Sterling is strengthening following Andrew bailey’s hawkish comments – the BoE’s governor has made no attempt to contradict financial market moves that have priced in the first interest rate increase before the end of the year. The dollar growth, however, outpaces that of the pound, as market participants get worried over soft economic data in China and climbing oil prices.”

Tim Hallinan, Trading Director

Main Headlines

Biden’s chief medical adviser said he expects US regulators to consider whether people who got the one-dose Johnson & Johnson vaccine should get an mRNA shot against Covid-19 as a booster. A so-called mix-and-match booster has been discussed among scientists and government experts, though no timeline has been released for when it might be officially considered. The issue is complicated by safety, supply and concern about confusing public messaging. The recommendations require backing by the FDA and the Centers for Disease Control and Prevention, which could come as soon as this week.

The governor of the Bank of England warned on Sunday that it “will have to act” to curb inflationary pressure. Speaking from home to the G30 group of central bankers, Andrew Bailey said inflation in the UK had already risen and would rise further in ways that would warrant action to tame medium-term inflation. Ramping up the rhetoric ahead of the Budget and the BoE’s next forecast on November 4, he signalled that his concerns on inflation during the current energy crisis had increased. The governor stuck by his view that the rise in inflation would ultimately be “temporary” but noted that it would last well into next year.

GBP

Sterling is weaker against the dollar and stronger against the euro this morning. Former US FDA Commissioner Scott Gottlieb called for “urgent research” into a mutation of the delta variant – known as delta plus – following a surge in Covid-19 cases in the UK. Weekly deaths from the virus have topped 800 for each of the past six weeks, higher than in other major western European nations. Ford will spend £230m to turn its Halewood plant in Merseyside into an electric vehicle parts factory. The decision safeguards 500 jobs at the site and is conditional on £30m of government funding.

EUR

The euro is lower versus most major currencies overnight. ECB President Christine Lagarde warned that the globalized nature of the euro area’s economy makes it highly vulnerable to systemic shocks from supply chain disruptions. The Bank is exploring raising its limit on purchases of EU-issued bonds, in a move that would enhance its flexibility in asset-buying schemes and boost the status of the bloc’s groundbreaking joint debt programme launched this year. Brussels is bracing for a painful escalation of its debate over the rule of law in Poland, as PM Mateusz Morawiecki prepares to defend his country in the European parliament tomorrow.

USD

The dollar is stronger against most majors in the early morning trade. Democrats still fighting over how to scale back their ambitions on social benefits and climate face a looming deadline to reach an agreement as both the House and Senate return to Washington this week. A $150 billion program aimed at pushing utilities to draw more power from clean-energy sources—could be cut what was initially planned as a $3.5 trillion bill. The fast-growing e-commerce business of luxury retailer Saks Fifth Avenue is aiming to go public soon at a valuation roughly triple what it was pegged at earlier this year.

Markets

Most Asian stocks and US futures slid Monday as surging energy prices cemented worries about inflation and Chinese growth slowed. MSCI Inc.’s gauge of Asia Pacific shares was on track for its first decline in four sessions as equities dropped in Japan, Hong Kong and China, where the economy slowed in the third quarter, weighed by a property slump and an energy crisis. US contracts dipped after the S&P 500 chalked its best week since July as earnings buoyed sentiment. European contracts were little changed. Bond yields in New Zealand and Australia jumped after New Zealand’s inflation accelerated to the fastest pace in 10 years. Yields on Australia’s three-year bond surged as much as 20 basis points to the highest since January. Ten-year Treasury yields extended a climb back to 1.6%. Oil prices built on their eighth weekly gain with West Texas Intermediate crude rising above $83 a barrel to the highest since 2014. Brent approached $86 a barrel.

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

11:00 a.m.: ECB’s de Cos speaks
11:00 a.m.: Norway to sell bills
11:00 p.m. Czech Republic Sept. PPI
11:30 a.m.: Germany, Netherlands to sell bills
2:50 p.m.: France to sell bills
4:30 p.m.: BOE’s Cunliffe speaks
EIA releases monthly Drilling Productivity Report

Corporate Events

Earnings include Albertsons, State Street, Steel Dynamics, Hexcel, Zions Bank, FNB
Apple unveils first redesign to its MacBook Pro laptop in five years.

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