December 9, 2021

“The dollar struggled to regain its lost ground as investors waited for a key Federal Reserve policy meeting due next week, whilst Omicron concerns kept uncertainty high. Sterling tanked to its lowest point this year as Goldman Sachs pushed back its forecast for a U.K. rate hike amid the government’s new Covid-19 Plan B measures.”

Sam Cornford, Partner and Head of Trading

Main Headlines

The Federal Reserve will end its bond-buying programme by the end of March and raise US interest rates soon after, according to a poll of leading academic economists for the Financial Times. The latest survey, conducted in partnership with the FT by the Initiative on Global Markets at the University of Chicago Booth School of Business, marks an abrupt shift in the economists’ expectations at a time of surging inflation and tumbling unemployment. Their responses underscore how swiftly the economic situation in the US has evolved over just a handful of months, as well as the pivot under way at the US central bank as it quickly unwinds its bond purchase schemes to focus on fighting soaring prices.

People in England are preparing for more restrictions on daily life after the PM approved his Covid Plan B to limit the spread of Omicron. The new rules some of which start on Friday, include masks in most public places, Covid passes for some venues and work from home guidance. But Boris Johnson faces a mounting backlash to the plans from his own MPs. One senior Conservative MP heckled Health Secretary Sajid Javid in the Commons, shouting for him to “resign”. That MP, William Wragg, had earlier questioned Mr Johnson over the timing of the Plan B announcement, suggesting it was a diversion from allegations over Downing Street parties during Delta variant restrictions last year. The Metropolitan Police says it is not investigating allegations No 10 staff broke Covid rules in December of last year due to “an absence of evidence”.

GBP

Sterling is lower against the dollar and higher against the euro overnight. Labour has called on the government to provide urgent financial support for industries including ceramics, glass and steel, which have hit by the spike in energy prices. Jonathan Reynolds, the new shadow business secretary, said if these industries collapsed the UK would end up importing the same products from overseas, with higher environmental costs. Elsewhere, 208 companies have been named and shamed by Ministers for failing to pay staff a National Minimum Wage including Mitie, Go-Ahead and Greencore. The Department for Business on Wednesday said the groups had been ordered to repay workers and faced penalties of nearly £2m after breaches left about 12,000 staff underpaid.

EUR

The euro is lower most major currencies overnight. Amid an extremely fast rate of infection of the new Omicron variant, Danish authorities are keeping close tabs and tightening rules on public life. Yesterday evening, Prime Minister Mette Frederiksen said her country would tighten its virus control measures, reducing opening hours for bars, extending time out of the classroom for Danish school children and calling on workers to stay away from the office. US President Biden will gather 100 countries to a virtual “Summit for Democracy.” Poland and Serbia were invited despite some questionable democratic credentials, but crucially Hungary was excluded to exert pressure on Viktor Orban after years of international reprimands for muzzling the media, meddling in the judicial branch and eroding LGBTQ+ rights.

USD

The dollar is well-bid against most major currencies in early morning trade. President Biden said Wednesday he hoped to convene meetings between Russia and NATO allies to discuss Moscow’s troop build-up along the Ukrainian border and ruled out the unilateral use of U.S. force if Russia invades Ukraine but did commit to tougher economic statecraft and sanctions than those used in 2014 against Russia. Vladimir Putin said he was responding to a “creeping threat” from the North Atlantic Treaty Organization and didn’t fully close the door on an invasion. The Senate approved legislation aimed at nullifying President Biden’s vaccine-or-test mandate for private employers, marking a significant rebuke even if lawmakers ultimately fall short of stopping the new Covid-19 rule.

Markets

Most Asian stocks rose Thursday as traders bet the global recovery will be resilient to the new virus strain that is spreading around the world. MSCI Inc.’s gauge of Asia Pacific equities advanced for a third day, led by Hong Kong and China, where policy makers have been endeavouring to shore up the economy. U.S. contracts dipped after the S&P 500 and the technology-heavy Nasdaq 100 extended a rally. European futures were steady. China’s central bank set its reference rate for the yuan at a weaker-than-expected level against the dollar, signalling its discomfort with the currency’s recent rally. Goldman Sachs Group Inc. pushed back its forecast for a U.K. rate hike amid the uncertainty from Omicron. The US crude price climbed, while the 10-year Treasury yield held around 1.50%.

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

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

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

9:30 a.m.: Hungary one-week deposit rate

12:00 p.m.: Serbia repurchase rate

1:00 p.m.: Ukraine key rate

2:00 p.m.: Russia gold and forex reserves

Europe ARA oil product inventories

Biden holds Summit for Democracy

U.S. wholesale inventories, initial jobless claims

Corporate Events

Earnings: Lululemon, Costco, Oracle, Raven Industries, Broadcom, Chewy

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