Morning Report

September 27, 2021

“The euro remained largely unchanged on Monday, ignoring developments in the German Bundestag elections where the Social Democrats are projected to narrowly default the CDU/CSU conservative bloc. The dollar settled and took a balanced position on Monday as a more hawkish approach is expected from the Federal Open Market Committee, whilst on the other hand risks from the Evergrande default are receding.”

Tim Hallinan, Trading Director

Main Headlines

This week will prove to be crucial for President Biden’s legislative agenda. Nancy Pelosi aims to pass a $550 billion infrastructure bill in the House and avoid a government shutdown and may have to scramble to reduce the $3.5 trillion price tag on a Biden’s economic plans. The Senate will vote on a stopgap funding bill with a debt ceiling suspension to prevent government failure due to a lack of funding to continue operating, but the Republican party will most likely block its consideration. This comes in a frantic push to boost worsening prospects for the democrats ahead of the mid-term elections in 2022. Pelosi has told senior democrats that she wants the infrastructure bill and budget bill passed by the end week, whilst the budgetary crisis continues to loom.

As the UK continues to face a domestic energy crisis, Prime Minister Boris Johnson is considering whether to use army personnel to drive fuel tankers around the country under a contingency plan called Operation Escalin. The PM begrudgingly accepted demands to issue visas to foreign truck drivers after panic-buying left some gasoline stations empty and critical emergency services like ambulances were left without fuel to function. The Department of Transport relaxed competition law limiting foreigners working as lorry drivers in the UK, however, business leaders have warned that issuing 10,500 visas does not go far enough. BP ran out of the main grades of fuel at almost a third of its U.K. stations after days of panic buying.


Sterling is well-bid against most majors overnight. The Labour party has backed leader Kier Starmer’s plans to overhaul the party’s rules, giving MPs more of a say in choosing its future leaders and making it harder for members to deselect MPs. In future, a Labour leader will need the backing of at least 20% of MPs, rather than the previous tally of 10% to get on a party wide ballot. This was dubbed a major step in the right direction for unifying support behind a single figure in the party, aiming to improve electoral prospects. Labour is coming off a run of four election losses. Left-wing group Momentum called these changes a blow to democracy in the party. Police divers and the MoD are due to protect a four-mile stretch of the River Clyde ahead of and during the COP26 summit in Glasgow in November.


The euro is lower against most majors in early morning trade. Germans went to the polls on Sunday to vote in their parliamentary elections, with the result a nip and tuck race between the Social Democrats (SDP) and conservatives (CDU/CSU). Olaf Scholz’s Social Democrats narrowly won the most votes in Germany’s election yesterday, taking 25.7% versus 24.1% for Armin Laschet’s Christian Democrats in exit polls, leaving Chancellor Angela Merkel in the lurch as a caretaker chancellor as the two biggest parties begin the process of building coalitions. The Greens and the FDP are poised to play a role in any coalition, projected to take 14.8% and 11.5% of the vote respectively, whilst many across Europe will be glad to see far-right party, AfD, predicted to get a smaller share of the vote than in 2017.


The dollar is lower against sterling and higher against the euro overnight. Senior U.S. and European officials meet in Pittsburgh on Wednesday, aiming to show that closer trans-Atlantic ties have value—in dollars and euros. Secretary of State Antony Blinken, Commerce Secretary Gina Raimondo and U.S. Trade Representative Katherine Tai plan to sit down with European Commission executive vice presidents Margrethe Vestager and Valdis Dombrovskis to launch a forum they agreed to in June, the U.S.-EU Trade and Technology Council. The US regained the Ryder Cup with a record 19-9 victory over Europe at Whistling Straits in Wisconsin on Sunday, having opened up an 11-5 lead going into the final day, to cap off a totally dominant performance.


Asian stocks fluctuated Monday as investors weighed the implications of surging energy prices and risks from China. MSCI Inc.’s index of Asian shares edged up. Hong Kong had modest gains, while Japan slipped. Shares in Shanghai declined as materials stocks dropped on worries that power curbs are hurting manufacturing and lingering concerns about further regulatory curbs. U.S. and European futures climbed. Commodities such as iron ore and commodity-linked currencies like the Australian dollar jumped. West Texas Intermediate extended a rally to top $75 a barrel, while Brent hit the highest level since October 2018 on signs that the crude market is tightening because of a global energy crunch. Ten-year Treasury yields broke through the top of a range that’s held since mid-July, surpassing 1.4% after hawkish messages last week from the Federal Reserve and the Bank of England. Bitcoin traded around $44,000. Digital currencies plunged on Friday.

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

9:00 a.m.: Spain Aug. PPI
9:00 a.m.: Riksbank’s Ohlsson speech
10:00 a.m.: Euro-area Aug. M3 money supply
11:00 a.m.: Norway to sell bills
11:30 a.m.: Germany to sell bills
12:00 p.m.: EU and Belgium to sell bonds
1:45 p.m.: ECB’s Lagarde in EU parliament hearing
2:00 p.m.: Sweden FSA Director General Thedeen speaks
2:50 p.m.: France to sell bills
5:00 p.m.: BOE Governor Bailey speaks to economists
6:30 p.m.: ECB’s de Cos speaks

Corporate Events

Earnings include Concentrix, Nine Dragons Paper Holdings