September 29, 2021

“The dollar seems to trade near its strongest levels of the year today, after driving higher with US yields and benefiting from investor nervousness about the Fed starting to withdraw policy support just as global growth headwinds gather. Along with the Fed’s tone, energy prices are surging and concerns are gathering about the growth outlook in China.”

Sam Cornford, Partner and Head of Trading

Main Headlines

Treasury Secretary Janet Yellen warned lawmakers that the federal government will likely run out of cash and extraordinary measures by October 18 unless Congress raises the debt ceiling. The new estimate from Yellen raises the risk that the United States could default on its debt in a matter of weeks if Washington fails to act. A default would likely be catastrophic, tanking markets and the economy, and delaying payments to millions of Americans. Previously, the Treasury Department estimated it would run out of cash and accounting maneuvers at some point in October. The warning comes hours after Senate Republicans blocked a bill that would have suspended the debt limit.

The fuel situation in the UK is starting to improve, PM Boris Johnson has said – as he urged motorists to fill up their cars in the “normal way”. He said the situation at fuel stations was “stabilising” and people should be “confident” to go about their business, after days of queues and pump closures. Labour said the government had let the country “crash from crisis to crisis”. Defence Secretary Ben Wallace has approved a request for 150 military tanker drivers to help deliver fuel. Training the drivers to use civilian fuel company tankers is expected to take place over the next three days, so the first deliveries could take place by the end of the week. With some drivers continuing to face difficulties in refuelling, there have been calls for key workers, such as health and social care staff, to receive priority at the pumps.

GBP

Sterling is well bid against most majors overnight. The UK government is to relax the regulation of gene-edited crops to enable commercial growing in England. The plants are to be tested and assessed in the same way as conventional new varieties. The changes are possible because the UK no longer has to follow European Union regulations, which are the strictest in the world. The Scottish, Welsh and Northern Irish governments will get to decide whether to adopt or opt out of the changes. Environment Secretary George Eustice said that he would be working closely with farming and environmental groups to help grow plants that are stronger and more resilient to climate change.

EUR

The euro is higher than the dollar and lower than the pound in the early morning trade. Europeans are leaving home for shopping, eating out, traveling, and visiting cinemas, just as they did before the pandemic. This is a sign of a recovery in consumer confidence, suggesting that the eurozone economic recovery has not been compromised so far. September data show European consumers’ high vaccination rate suggests that people are starting to feel adventurous again. Part of the rebound was due to school reopening and workers returning to the office. This is reflected in the use of Eurozone airports and domestic public transport, reaching its highest level in September since the pandemic broke out in early 2020, according to Google Mobility Data and the Apple Mobility Report.

USD

The dollar is lower than most majors this morning. Senator Elizabeth Warren said she opposes a second term for Federal Reserve Chair Jerome Powell, calling him a “dangerous man” because of the financial regulations that have been loosened during his tenure. Warren’s statement yesterday makes her one of only a few Democratic lawmakers to publicly call for the replacement of Powell — a Republican and a Trump appointee — when his term ends early next year. Last month, a group of House progressives including Rep. Alexandria Ocasio-Cortez said they want to see someone at the helm of the central bank who is more aggressive on financial regulation and climate change.

Markets

Asia stocks declined Wednesday as rising bond yields stoked fears about inflation and as China Evergrande Group’s debt crisis intensified. MSCI Inc.’s gauge of Asian stocks had the biggest drop in almost six weeks — and is headed for its first quarterly slide in six. Japan fell as two candidates took part in a runoff vote for leader of the ruling party. China slid on the deepening debt crisis at China Evergrande Group. U.S. futures rose after the S&P 500 fell the most since May with concerns over the debt-ceiling impasse in Washington adding to investor angst. The Nasdaq 100 tumbled the most since March as technology shares fared worse amid rising Treasury yields. European contracts climbed. Treasuries stabilized after the yield on the 30-year note jumped almost 10 basis points. Oil retreated and the dollar slipped.

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

8:30 a.m.: Norges Bank borrowing plan for 4Q

9:00 a.m.: Sweden Sept. economic tendency survey

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

10:00 a.m.: Italy Aug. PPI

10:30 a.m.: U.K. Aug. mortgage approvals

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

11:00 a.m.: Norway, Italy sell bonds

11:00 a.m.: Sweden, Greece sell bills

11:00 a.m.: Euro-area Sept. consumer confidence

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

1:35 p.m.: ECB’s Centeno, Stournaras, Makhlouf speak at SPI event

2:00 p.m.: Guindos chairs session at ECB Forum

3:15 p.m.: Elderson chairs session at ECB Forum

3:15 p.m.: Riksbank’s Breman gives speech

4:30 p.m.: Lane chairs session at ECB Forum

4:45 p.m.: Riksbank’s Floden gives speech on ESG

5:45 p.m.: Bailey, Kuroda, Lagarde, Powell on ECB Forum Panel

5:45 p.m.: BOE’s Bailey speaks on ECB panel

Corporate Events

Earnings include Cintas, Next, New Amsterdam Invest, Jabil, Banque Centrale Populaire

 

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