August 18, 2021

“The dollar is being supported by a nervous risk environment as investors have cut exposure to riskier currencies, mostly on virus concern. Markets are paying attention to the Delta variant and the area which is of most concern seems to be China both in terms of regulatory risks and recent Covid outbreaks.”

Tim Hallinan, Trading Director

Main Headlines

The Biden administration scrambled to put a botched evacuation of Afghanistan back on track it admitted its original plans needed to be changed following a day of chaos and violence at Kabul’s international airport. In an attempt to reassert control over events on the ground after the Taliban swiftly took control of the country from a crumbling Afghan military, US officials said they had re-established security at the airport and would speed up the pace of evacuations in the days ahead. The US completed its evacuation of US diplomats and only a “core diplomatic presence” remained in Kabul.

Job vacancies in the UK have reached a record high as the labour market rebounded from the effects of the pandemic, with growth in recruitment surpassing economists’ expectations in the three months to June. The number of people in employment rose to 32.28m in the second quarter, up 95,000 from January to May, the Office for National Statistics said. The jump in recruitment beat the 75,000 forecast by experts polled by Reuters and marked the strongest quarter of growth since Covid-19 restrictions were first imposed. The increase pushed the headline unemployment rate down to 4.7 per cent.

GBP

The pound is higher than the dollar and lower than the euro this morning. UK regulators are to travel to Port Talbot to meet thousands of steelworkers suspected of being given bad pension advice and now eligible for compensation. The event, led by the Financial Conduct Authority, will take place in September in the small seaside community, which became the centre of a major pension transfer mis-selling scandal in 2017. The FCA, alongside the Financial Ombudsman Service and the Financial Services Compensation Scheme, will speak to individual steelworkers as a six-year compensation claims’ deadline draws in.

EUR

The euro is stronger versus most majors in the early morning trade. Poland will dismantle a judges’ disciplinary chamber as part of wider judiciary reforms in coming months, the government said on Tuesday after the Court of Justice of the European Union ruled that the disciplinary mechanism undercuts EU law. The long-running dispute over Warsaw’s judicial reforms has heated up in recent months, with Brussels demanding that Poland implement an EU court ruling to dissolve the contested chamber for judges, which critics say is politicized. “Poland will continue reforms of the judiciary, also in the area of judges’ answerability, aimed at improving the efficiency of this system,” the government said in a statement, adding that the scrapping of the chamber for judges would be part of the overhaul.

USD

The dollar is weaker than most majors overnight. America’s appetite for fossil fuels has come roaring back as the economy cranks into gear, providing a boost to energy groups but flying in the face of the US governement’s drive to slash emissions. Motorists’ return to the roads following the loosening of pandemic restrictions is pushing up fuel demand and the bottom lines of oil refiners, while a shift away from natural gas in power generation has been a boon to coal miners. The federal Energy Information Administration expects Americans to burn through a daily average of 8.8m barrels of petrol this year, up 10 per cent on last year, but below the 9.3m b/d consumed in 2019, largely thanks to an increase in people working from home.

Markets

MSCI Inc.’s gauge of Asia-Pacific shares was on course to snap a four-day losing streak, with Japan, China and Hong Kong posting gains. U.S. equity contracts reversed a decline and turned higher. Overnight, the S&P 500 posted the largest retreat in a month, while the Nasdaq 100 also fell. Treasuries were little changed ahead of the release of the latest Federal Reserve minutes. The outlook for yields is highly uncertain amid the spread of the delta virus variant, the prospect of reduced stimulus support and elevated inflation. New Zealand’s dollar was whipsawed by its central bank, which left interest rates unchanged but signaled an intention to tighten policy soon. The decision was complicated by a snap national virus lockdown — all of which highlighted the influence of the delta strain on markets. Gold was at $1,791.70 an ounce, up 0.3%.

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

8:00 a.m.: U.K. July CPI, retail price Index
10:00 a.m.: Norway Wealth Fund 1H report
10:30 a.m.: U.K. June house price index
11:00 a.m.: Euro-area July CPI
2:30 p.m.: U.S. July housing starts, building permits
4:30 p.m.: EIA U.S. crude oil inventories
6:00 p.m.: Russia July PPI

Corporate Events

Earnings include Tencent, Coloplast, Cisco, Lowe’s, TJX, Analog, Target, Synopsys, Robinhood, Coloplast, Carlsberg, Persimmon, Embracer

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