Morning Report

October 26, 2021

“The dollar eased a touch against riskier currencies today as solid company earnings and a glimmer of improvement in US-China trade ties lifted sentiment, while rates expectations weighed on the euro. Investors’ focus will turn first to US growth data on tomorrow and then to the ECB’s meeting on Thursday.”

Sam Cornford, Partner & Head of Trading

Main Headlines

President Biden will allow all international travellers to enter the US as long as they have received any vaccine authorised by the WHO, even the relatively untested Chinese-made Sinovac and Sinopharm jabs, from 8 November. Yesterday, The US president signed a presidential proclamation detailing the country’s new international travel rules, which will replace the patchwork of blanket bans that has been in place since the beginning of the pandemic. Under the rules, which will take effect in two weeks’ time, anyone who has been inoculated with one of the seven vaccines authorised by the WHO will be allowed to enter the US by land or air.

Chancellor Sunak will use his Budget to announce a pay rise for workers on low incomes and end a pay freeze for 5m public sector staff, but Labour warned that households risked being left worse off as price rises and tax increases bite. Low-paid workers in the UK will receive a 6.6% pay rise from next April as ministers seek to soften the impact of rising living costs by lifting the national living wage. Government officials confirmed that the chancellor will use his Budget on Wednesday to formally announce plans to increase the wage, which applies to workers aged 23 and over, from £8.91 an hour to £9.50.


The pound is higher than the euro but lower than the dollar overnight. The UK’s three spy agencies contracted Amazon’s cloud computing arm (AWS), to host classified material in a deal aimed at boosting the use of data analytics and artificial intelligence for espionage. The procurement of a high-security cloud system has been championed by GCHQ, the UK’s signals intelligence body, and will be used by sister services MI5 and MI6, as well as other government departments such as the Ministry of Defence during joint operations. The contract is likely to ignite concerns over sovereignty given that a vast amount of the UK’s most secret data will be hosted by a single US tech company.


The euro is lower than most majors this morning. Christine Lagarde will face an unusual test this week when the ECB President is likely to push back against a growing belief among investors that the ECB is underestimating future inflation and could raise interest rates next year. Rising inflation is relatively new ground for the ECB, which for much of the past decade has consistently undershot both its own 2% target and its forecasts on inflation. Yet the ECB governing council is not expected to change policy after it meets on Thursday. Instead the main focus will be on what Lagarde says afterwards about the inflation outlook and what this means for when it might raise rates.


The dollar is well bid against most majors in the early morning trade. Leading credit card lenders in the US are welcoming signs that customers are poised to increase their borrowings after paying down balances during Covid-19. Depositors are reducing the cash cushions they built up during the crisis with the help of government stimulus payments and debt forbearance programmes. Any increase in credit card borrowing would be good news for the banking industry, which has struggled to find profitable uses for the cash piling up on its balance sheets amid tepid loan demand. All the lenders said they expected payments rates to continue to decline.


U.S. equity futures rose and Asian stocks were steady Tuesday after a record S&P 500 close as corporate earnings and progress on President Joe Biden’s economic agenda helped sentiment even as the debate over inflation risks intensified. Japanese equities outperformed while China and Hong Kong slipped. Traders digested incremental progress in U.S.-China economic and trade talks in the shape of a second call in about four months between Vice Premier Liu He and Treasury Secretary Janet Yellen. The yen fell amid easing demand for havens. U.S. futures advanced, with Nasdaq 100 contracts outperforming. The tech-heavy gauge led U.S. gains overnight amid a Tesla Inc. rally to a $1 trillion market value. Facebook Inc. was higher in late trading on strong user growth and a pledge to buy back as much as $50 billion more in stock. Gold was at $1,803.48 an ounce, dropping 0.2%.

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

9:00 a.m.: Spain Sept. PPI
9:00 a.m.: Norway hosts Barents Euro-Arctic Council minister meeting
9:30 a.m.: ECB’s de Cos speaks at climate change risks event
9:30 a.m.: Sweden Sept. PPI
12:00 p.m: U.K. Oct. CBI retailing reported sales
5:45 p.m.: ECB’s Villeroy speaks

Corporate Events

Earnings include Twitter, Alphabet, Microsoft, Visa, Robinhood, Waste Management, UPS, AMD, GE, S&P Global, Capital One, JetBlue Airways, Lockheed Martin, Invesco, MSCI, Raytheon, Hasbro, Polaris, 3M, Eli Lilly, ASM International and Texas Instruments.


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