Morning Report – Thursday 15 April

Jon Robson, Head of Trading

“The easing of Treasury yields from last month’s surge and Powell’s reassurance that low interest rates are here to stay sent the dollar to a new four-week low. While the improving risk sentiment will likely continue holding the dollar back, more near-term direction will be given later today as retail sales readings for March and weekly jobless figures are released.”

Main Headline

Federal Reserve Chair Jerome Powell said it’s highly unlikely that interest rates will rise before the start of 2022. Speaking about the eventual exit from the Fed’s aggressive policy support, Powell insisted that the Fed’s bond purchases will likely be scaled back before higher interest rates are considered. Policy makers will wait until inflation has reached 2% sustainably and the labour market recovery is complete. The U.S. central bank enters its traditional blackout period on public comment on Friday night ahead of the April 27-28 meeting of the Federal Open Market Committee.

Former prime minister David Cameron and Chancellor Rishi Sunak are set to be called to give evidence to parliamentary inquiries into the Greensill Capital scandal. Boris Johnson yesterday defeated opposition calls for a full parliamentary inquiry into Cameron’s lobbying of ministers on behalf of the now insolvent Greensill Capital. Critics have accused the Conservative party of “sleaze” and demanded an overhaul of lobbying rules. Simon Case, head of the civil service, wrote to senior officials, requesting full disclosure of their outside interests.

GBP

Sterling is higher against most major currencies this morning. According to the Office for National Statistics, UK labour productivity rose last year despite the economic shock of the pandemic, because lockdown measures tended to close down less productive businesses. The UK government announced a quick-fire consultation into mandatory immunisation for those working in residential homes for the elderly.

EUR

The euro is higher against the dollar and weaker versus the pound overnight. The IMF said Eurozone countries should increase government spending by an extra 3 per cent of gross domestic product over the next year to mitigate the economic impact of the coronavirus pandemic. The Greek PM Kyriakos Mitsotakis has hailed the “Greece 2.0” programme that looks to spend billions of euros from the EU’s post-pandemic recovery fund to rebuild the economy, seeking in the process to transform its industrial model, attract foreign investment and mend its public finances.

USD

The dollar is lower against most other majors in early morning trade. The American government’s recommendation to pause using Johnson & Johnson’s Covid-19 vaccine will remain in place after an advisory panel put off a vote on how to move forward following reports of a few cases of life-threatening blood clots. Meanwhile, the Biden administration is poised to take action against Russian individuals and entities in retaliation for alleged misconduct including the SolarWinds hack.

Markets

Shares fell in Hong Kong and China as the Chinese central bank’s liquidity operations signalled it’s seeking to contain rising leverage. U.S. equity futures edged higher, after Coinbase traded down in its Nasdaq debut overnight and the S&P 500 Index retreated. European contracts dipped. The benchmark 10-year Treasury yield held around 1.63%. Oil held gains. Asia was also watching for further tremors from the sharp selloff in the bonds of distressed-debt enterprise China Huarong Asset Management Co., which has pushed investment-grade spreads higher.

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

8:45 a.m.: France March CPI

10:00 a.m.: Italy March CPI

10:30 a.m.: BOE Liabilities/Credit Conditions Survey

1:00 p.m.: Ukraine, Turkey rate decisions

2:30 p.m.: U.S. initial jobless claims, March retail sales

6:00 p.m.: Russia March industrial production

Corporate Events

Earnings include TSMC, BofA, Citi, UnitedHealth, BlackRock, CureVac, Chr Hansen, Naked Wines

L’Oreal, Entain, Publicis update on sales

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