October 8, 2021

“The US dollar reacted positively to the short-term debt ceiling agreement, nearing a one-year high, despite the improvements in risk appetite which usually favour pro-growth currencies. Today’s payrolls report could cement expectations that the Federal Reserve will soon start tapering bond purchases.”

Sam Cornford, Partner and Head of Trading

Main Headlines

The Senate voted along party lines Thursday to raise the U.S. borrowing limit into December, after Democrats struck a short-term agreement with Republican leaders that averted a looming default for now but sets up another showdown within less than two months. The $480 billion increase in statutory borrowing would run out around 3 December. The debt limit increase still needs a vote in the House, which has been on break. Schumer and Minority Leader Mitch McConnell struck a deal for the legislation earlier Thursday. News of the accord early sparked a rally in the stock market.

The British government has slashed its Covid-19 travel “red list” of countries from 54 to just seven from which travellers must still go into hotel quarantine on arrival in England. Ministers announced on Thursday evening that the toughest restrictions would only remain on a clutch of destinations in Latin America: Peru, Ecuador, Colombia, Panama, Venezuela, Haiti and the Dominican Republic. The decision means that people coming from 47 previously red list destinations — including Brazil, Argentina, Thailand and South Africa — will no longer have to pay to stay in a hotel for 11 days after arriving in England.

GBP

Sterling is weaker against most major currencies this morning. High levels of UK inflation could persist for longer than expected, the Bank of England’s new chief economist said, suggesting he agrees with the more hawkish elements of the Monetary Policy Committee. A Saudi Arabia-led investment group has completed a £305m acquisition of English football club Newcastle United. The gap in education funding in England between private and state schools has more than doubled over the past decade, driven by a significant rise in private school fees, according to research by a think-tank.

EUR

The euro is higher versus the pound and weaker versus the dollar overnight. Poland’s constitutional tribunal has ruled that parts of EU law are not compatible with the Polish constitution, in a dramatic escalation of a battle between Warsaw and Brussels with tens of billions of euros in EU funding at stake. In Germany, the chancellor candidate of Angela Merkel’s Christian Democrats, Armin Laschet, has signalled he’s willing to step down — another sign that the next government will probably be run by the country’s current finance minister, Olaf Scholz. Meanwhile, billionaire PM Andrej Babis is poised to be re-elected in the Czech Republic, though he will fall short of a majority and a series of scandals have hurt his chances of finding partners.

USD

The dollar is stronger against most majors in the early morning trade. Today’s U.S. nonfarm payrolls report will be key for investors looking to assess whether the abrupt deceleration in hiring in August was a blip or something with staying power. A senior Republican has hit out at Gary Gensler, the chair of the Securities and Exchange Commission, over his attempts to regulate cryptocurrencies, as its defenders increase their opposition to several regulatory proposals. A US nuclear-powered attack submarine struck an object while submerged in international waters in the Indo-Pacific region last week, the Navy said, adding that 11 sailors suffered minor to moderate injuries.

Markets

Most Asian stocks climbed Friday aided by a rise in Chinese shares and easing concerns about the US debt ceiling. Treasury yields ticked up ahead of a key American jobs report. Japanese shares outperformed and China advanced after reopening from a long holiday. S&P 500, Nasdaq 100 and European futures fluctuated in the wake of a third day of gains for US stocks. China’s stock gauges weathered the ongoing debt woes in the nation’s property sector and Beijing’s wider regulatory broadsides. Government bond futures fell as the central bank drained short-term liquidity from the banking system. The 10-year US Treasury yield reached the highest since June. Investors are fretting over inflation amid a global energy crunch. Australian and New Zealand debt fell, the yen declined.

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

8:00 a.m.: Germany Aug. trade balance

8:00 a.m.: Norway Aug. GDP

9:00 a.m.: Austria Aug. industrial production

9:00 a.m.: Czech Republic Aug. retail sales

9:00 a.m.: Hungary Sept. CPI

11:00 a.m.: Greece Sept. CPI

11:00 a.m.: Nobel Peace Prize

12:00 p.m.: U.K. to sell bills

1:00 p.m.: BOE quarterly bulletin

2:05 p.m.: U.S.’s Yellen, ECB’s Lagarde speak at B20 event in Italy

2:30 p.m.: U.S. Sept. nonfarm payrolls

3:00 p.m.: ECB’s Panetta speaks

7:00 p.m.: Baker Hughes U.S. rig count

Corporate Events

Earnings include Tata Consultancy Services

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