July 12, 2021

“The outlook for US inflation and the speed of the Fed’s future policy tightening are back in focus ahead of tomorrow’s consumer price data and Jerome Powell’s testimony from Wednesday. If we see strong data, the Federal Reserve could bring forward their projection for their first rate hike further from their current forecast of 2023.”

Sam Cornford, Partner & Head of Trading

Main Headlines

President Biden warned Vladimir Putin that Russia would face consequences if it failed to act against hackers behind a spate of ransomware attacks, saying the US would take “any necessary action” to protect its people and infrastructure. The White House said the two leaders spoke by phone on Friday “about the ongoing ransomware attacks by criminals based in Russia that have impacted the US and other countries around the world”. Biden “underscored the need for Russia to take action to disrupt ransomware groups operating in Russia and emphasised that he is committed to continued engagement on the broader threat posed by ransomware,” the White House said.

The UK government backtracked on the use of masks after remaining coronavirus restrictions are lifted in England on July 19, with a senior minister saying they should still be worn indoors as case numbers continue to rise sharply. Boris Johnson is expected to announce on Monday that “step four” of lockdown easing will go ahead next week, despite concerns from scientists that hospitals may be overwhelmed this summer. Boris Johnson will host a Downing Street press conference on Monday to announce the final relaxation of rules.

GBP

The pound is weaker than the dollar and stronger than the euro in the early morning trade. An independent commission into the UK civil service has called for the roles of the most senior positions in each Whitehall department to be scrapped to improve the government’s performance. The Commission for Smart Government, an independent review, said on Monday the government “must reform itself or fail” after the coronavirus pandemic, proposing sweeping changes to recruitment and departmental structures. Its report argued that permanent secretaries should be replaced by a new chief executive role to give a “clear focus on strategy, execution and organisational effectiveness”, with a title that reflects a need for delivery and data-driven assessment instead of a more traditional courtier role.

EUR

The euro is lower than most majors this morning. Italy won the European Championship for the first time since 1968 as goalkeeper Gianluigi Donnarumma saved two England penalties en route to a 3-2 shoot-out win. Harry Kane and Harry Maguire scored for England but, while Pickford kept hopes alive with saves from Andrea Belotti and Jorginho, Domenico Berardi, Bonucci and Federico Bernardeschi scored for Italy. Both sides had fought out a 1-1 extra-time draw at a raucous Wembley on Sunday. England remains without a major trophy since 1966.

USD

The dollar is well bid against most majors overnight. A top Federal Reserve official has warned the spread of the Delta Covid variant and low vaccination rates in some parts of the world poses a threat to the global recovery as she urged caution in removing monetary support for the US economy. “I think one of the biggest risks to our global growth going forward is that we prematurely declare victory on Covid,” Mary Daly, the president of the Federal Reserve Bank of San Francisco said. Daly’s warning came as investors sought out safe havens in droves this week, sending US government bond prices soaring. Treasury yields have fallen sharply as a result, with the benchmark 10-year note trading at its lowest level since February.

Markets

Asian stocks rose at the start of the week after their U.S. peers chalked fresh records and China’s central bank moved to boost liquidity. Treasury yields stabilized after jumping Friday. Shares in Japan outperformed. Australia advanced despite a prolonged lockdown in the largest city, Sydney, as virus cases continue to rise. U.S. futures dipped as investors remain concerned about the spread of delta variant and a slowdown in vaccination rates. The S&P 500 finished last week at all-time highs. European contracts were little changed. Gold traded at $1,802.36 an ounce, down 0.3%.

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

8:00 a.m.: Germany June wholesale prices

10:30 a.m.: Bank of Italy’s Banks and Money Monthly Statistics

11:30 a.m.: Germany Sells 4 Billion Euros 189-Day Bills

12:00 p.m.: EU Decision on Hungary’s Recovery Plan

12:00 p.m.: Portugal June CPI

2:50 p.m.: France sells bills

Corporate Events

Earnings include KKR Acquisition, New Frontier

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