Wednesday, 16 June, 2021

“The dollar was holding onto a near a one-month high against a basket of currencies until now as investors tried to ascertain if the Fed might alter the language on its stimulus following a recent jump in US inflation. Despite the recent drop, the dollar is on a strengthening trajectory at the moment.”

Sam Cornford, Senior FX Dealer

Main Headlines

President Biden appointed Lina Khan, a top antagonist of the tech industry, to chair the Federal Trade Commission, the federal government’s primary antitrust watchdog. Biden’s decision to put Khan in charge of the FTC’s agenda is the clearest sign yet that his administration will take a drastically different approach to regulating the tech giants than did President Barack Obama, whose administration took a largely hands-off approach toward Silicon Valley. Reaction from both supporters and detractors reflected that expectation. A federal court blocked the Biden administration’s pause on oil and gas leasing. The preliminary injunction comes as a blow to one of the administration’s key actions to address climate change.

Rishi Sunak could be forced to spend up to £4 billion more on pensioners from next year if he sticks to the Conservative Party’s “triple lock” pledge. The potential for extra pension funding was part of the latest jobs data from the Office for National Statistics, which said that average weekly pay, excluding bonuses, had risen by 5.6 per cent year-on-year in the three months from February to April 2021. President Biden is expected to meet President Putin later today, at the end of his European trip that included the G7 meeting and NATO and EU summits. Ukraine, Belarus, Iran, Syria and issues like arms proliferation are all expected to be discussed.

GBP

The pound is well bid against most major currencies this morning. Britain is in talks with six companies for building gigafactories to produce electric vehicle batteries. Ford Motor Co, Nissan Motor Co Ltd, LG Corp, Samsung and start-ups Britishvolt and InoBat Auto are in talks with the British government or local authorities about locations for potential factories and financial support. The UK government’s plan to prohibit the sale of new petrol and diesel cars by 2030 and hybrids by 2035 will require the country’s vehicle plants to shift to producing electric models. A UK business department spokesperson said that the government was “dedicated to securing gigafactories, and continue to work closely with investors and vehicle manufacturers to progress plans to mass produce batteries in the UK”.

EUR

The euro is stronger than the dollar but weaker than the pound in the early morning trade. Christine Lagarde, President of the European Central Bank, has become bolder in setting the agenda in stimulus talks. Last week’s decision to keep emergency bond-buying at elevated levels was heavily influenced by comments she made three weeks earlier, when she said it’s “far too early” and “actually unnecessary” to think about reducing stimulus, officials familiar said. “A sustained rise in market rates could translate into a tightening of wider financing conditions,” Lagarde said, explaining why officials committed to keep asset purchases at a “significantly higher” pace than in the first months of the year.

USD

The dollar is lower than most majors overnight. The US has warned the EU against pursuing “protectionist” technology policies that exclusively target American companies, ahead of Joe Biden’s first presidential visit to Brussels. The National Security Council, an arm of the White House, wrote last week to complain about the tone of recent comments about the EU’s flagship tech regulation, as debates are about to begin in the European parliament. “We are particularly concerned about recent comments by the European Parliament rapporteur for the Digital Markets Act (DMA), Andreas Schwab, who suggested the DMA should unquestionably target only the five biggest US firms,” said an email.

Markets

Asian stocks, U.S. and European futures saw muted trading Wednesday as investors awaited a policy decision from the Federal Reserve. Crude oil traded at the highest since 2018. Shares were little changed in Japan and Australia, while South Korean stocks led gains. Chinese equities declined after the government ordered state firms to curb overseas commodities exposure to rein in soaring raw materials prices. U.S. and European futures were little changed. Earlier, weakness in the technology and real estate sectors helped snap a three-day winning streak for S&P 500 Index. Copper reversed gains on China’s moves. The 10-year Treasury yield held around 1.5%. The dollar was steady versus major peers. Gold was at $1,859.93 an ounce

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

8:00 a.m.: U.K. May CPI, RPI, PPI

10:00 a.m.: Turkey sells gold bonds

10:00 a.m.: ECB’s Elderson speaks

10:30 a.m.: U.K. April House Price Index

11:00 a.m.: ECB’s Guindos speaks

11:00 a.m.: Euro-Area 1Q Labour Costs

11:00 a.m.: U.K. sells bonds

11:30 a.m.: Germany sells bonds

12:00 p.m.: Israel 1Q GDP

4:30 p.m.: EIA Crude Oil Inventory Report

8:00 p.m.: Fed rate decision

8:30 p.m.: Fed’s Powell speaks

U.S.’s Biden, Russia’s Putin hold summit in Geneva

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