October 5, 2021

“The U.S. dollar edged back toward a one-year high versus major peers on Tuesday ahead of a key payrolls report at the end of the week which could boost confidence that the Fed will start tapering stimulus as soon as next month. The safe-haven currency was also boosted by an equity sell-off that spread from Wall Street to Asia.”

Tim Hallinan, Trading Director

Main Headlines

As centrist Democrats in Congress have worked to block or strip out major provisions of President Biden’s $3.5 trillion social safety net and climate plan, a string of online ads has popped up in their states and districts, lavishing praise on them. Pharmaceutical groups and other business interests are funding a lobbying campaign aimed at broadening the infrastructure bill and pushing through its enactment. Business groups are working in overdrive to fight large swaths of it, such as raising taxes on the wealthy and corporations; expanding Medicare to cover dental, hearing and vision services; and proposed taxes and fees to cut down on carbon emissions.

As part of the Pandora Papers investigations by the International Consortium of Investigative Journalists, the secret owners of more than 1,500 UK properties bought using offshore firms have been uncovered by a BBC investigation. The details are featured in the Pandora Papers leak of offshore financial documents and list property with an estimated value in excess of £4bn.The owners include high-profile foreign politicians, individuals accused of corruption and UK political donors. Ministers say they will bring in a new law when they have parliamentary time. Successive Conservative governments have pledged to introduce legislation making it compulsory to name those owning property via foreign companies in a bid to stamp out money-laundering.

GBP

Sterling is well-bid against most majors overnight. Home Secretary Priti Patel will unveil the new Criminal Disruption Prevention Orders at the Conservative conference. Courts will be given new powers to stop activists attending demonstrations, after weeks of disruption to Britain’s motorways by climate protesters. A Tory source said the laws would target disruptive activists or those likely to commit crime. Meanwhile, the Justice Secretary Dominic Raab will vow to increase the electronic tagging of offenders. The measures to be unveiled by Ms Patel come in response to a campaign by climate activists to block major road arteries, including the M1, M4 and M25. The campaign by Insulate Britain has been running for over three weeks and has led to more than 300 arrests. The group want the government to insulate all UK homes by 2030 to help cut carbon emissions.

EUR

The euro is lower against most majors in early morning trade. Michel Barnier’s presidential bid in France received a fresh boost as conservative Les Républicains decided last week to pick their presidential runner in an internal party convention, rather than holding an open primary allowing any French voter to choose — potentially good news for Barnier who has been polling behind competitors. Romanian PM Florin Citu is set to be toppled in a no-confidence vote, intensifying political tensions that have already dragged the currency to a record low. Citu fell out with his main coalition partner after holding power for less than a year. Also today, the nation’s central bank will probably hold its key rate at 1.25%, but a growing minority of economists predicts the first increase since 2018.

USD

The dollar is higher against the euro but lower against sterling in early morning trade. The Biden administration began defining its China trade policy Monday, saying it aims to launch new talks with Beijing but will keep existing tariffs in place, while also restoring the ability of U.S. importers to seek exemptions from those levies. The Fed’s internal watchdog will open an investigation into trading activity by senior U.S. central bank officials following revelations about transactions in 2020. The Office of Inspector General will look at whether the trading was in compliance with ethics rules and the law. The Fed’s efforts on trading so far have not satisfied critics.

Markets

A selloff in stocks continued in Asia on Tuesday and the dollar strengthened amid caution about elevated inflation fuelled by commodity prices and risks from the debt woes in China’s property sector. MSCI Inc.’s Asia-Pacific share index tumbled as much as 1.7% before paring some losses. The energy sector was among the few to rise on a rally in crude oil. Japan’s Nikkei 225 and South Korea’s Kospi extended losses from their recent peaks to 10%, putting them on track for technical corrections. U.S. and European futures were steady after technology shares led a Wall Street slump. Oil held near the highest since 2014 following OPEC+’s decision to maintain a gradual supply hike even as a natural-gas crisis boosts crude demand. The Bloomberg Commodity Spot Index hit an all-time peak. Treasury yields rose.

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

8:00 a.m.: Russia Sept. Markit PMIs

8:45 a.m.: France Aug. industrial production

9:15 a.m.: Spain Sept. Markit PMIs

9:45 a.m.: Italy Sept. Markit PMIs

9:50 a.m.: France Sept. Markit PMIs

9:55 a.m.: Germany Sept. Markit PMIs

10:00 a.m.: Euro-area Sept. Markit PMIs

10:00 a.m.: Norges Bank’s Olsen speaks

10:30 a.m.: U.K. Sept. Markit/CIPS PMIs

10:30 a.m.: Spain to sell bills

11:00 a.m.: U.K. to sell bonds

11:00 a.m.: Hungary to sell bills

11:15 a.m.: Switzerland to sell bonds

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

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

12:00 p.m.: ECB’s Holzmann speaks

12:30 p.m.: U.K. to sell bonds

12:30 p.m.: ESM to sell bills

1:00 p.m.: Russia to sell notes

2:00 p.m.: Hungarian central bank green mortgage briefing

5:00 p.m.: ECB’s Lagarde speaks

Romanian central bank sets rate policy

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