Wednesday 9 June, 2021

“The greenback has largely retained recent gains, but the focus of market participants remains firmly on the US inflation data and ECB meeting tomorrow. All will attempt to gauge if the pace of the global recovery impacts stimulus programmes and whether tapering could be hastened, boosting the dollar, if inflation runs hotter than anticipated”.

Sam Cornford, Senior FX Dealer

Main Headlines

President Joe Biden is set to arrive in the UK today as part of his first international trip since his inauguration in January ahead of the start of the G7 summit on Friday. Due to meet with Prime Minister Boris Johnson, Biden is expected to reaffirm the “special relationship” with Britain and focus on the consequences of Brexit on Northern Ireland at a time of heightened tension between the UK and EU. Biden is expected to express his support for the Northern Ireland protocol, which he sees as a crucial part of maintaining the Good Friday agreement warn of , while warning the EU that it must be less “bureaucratic.”

Chancellor Rishi Sunak is expected to seek an exemption for the City of London from the “historic” agreement struck by G7 nations on increasing tax collection from multinationals. The UK position is for financial services, including global banks with headquarters in London, to be exempt. EU members are also reported to want the financial services industry to be exempt. Biden, however, is expected to want to broaden the scope of the taxation agreement to avoid excessive penalisation of US tech giants.

GBP

Sterling is lower against the euro and largely unchanged against the dollar this morning. Following a rise in the Delta variant, the Government is set to provide a “strengthened package of support” to Greater Manchester and parts of Lancashire. Health Secretary Matt Hancock pledged a boost to vaccinations and testing, which will include military support and supervised in-school testing, as people were warned to minimise travel. Elsewhere, the Government has been accused of a U-turn over summer holidays abroad by major airlines and tourism bodies after the public was urged to avoid overseas travel due to the threat posed by coronavirus variants.

EUR

The euro is stronger against other majors overnight. Amid rising Brexit tensions, European Commission Vice President Maros Sefcovic and Brexit Minister David Frost are due to meet to resolve disagreement over Northern Island. New controls affecting Irish Sea border goods checks are due to begin next month, affecting chilled meat products, and both sides will assess possible simplifications to the Northern Ireland Protocol to resolve the dispute. Sefcovic warned the UK to not take any further unilateral action to delay checks, stating that the EU “will not be shy in reacting swiftly, firmly and resolutely to ensure that the UK abides by its international law obligations.”

USD

The dollar is lower against the euro and steady against the pound in the early morning trade. The US has eased travel restrictions for many countries, after lowering 61 nations from a Level 4 “avoid all travel” rating as the inoculation rollout continues. Fully-vaccinated passengers in the US are now free to travel to countries such as France, Spain and Italy, and the US State Department further loosened travel warnings. Meanwhile, US tax authorities have launched an investigation into the leak of Internal Revenue Service data by non-profit publication ProPublica, which provides detail on the legal tax avoidance strategies deployed by American billionaires, including Mike Bloomberg, Elon Musk, and Jeff Bezos

Markets

Asian stocks traded in narrow ranges Wednesday as investors digested data on price pressures to gauge the outlook for stimulus amid the recovery from the pandemic. Ten-year U.S. Treasury yields declined. Shares slipped in Japan and edged up in China, where factory-gate inflation for May was at the highest since 2008 but consumer-price gains remained subdued. The nation is also considering imposing a cap on the price of thermal coal to contain high energy costs. European and U.S. equity futures were little changed after the S&P 500 ended just shy of its May 7 record close. Oil resumed its rally to top $70 a barrel in New York. Bitcoin remains under pressure, trading around $33,000 after a retreat this week.

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

8:00 a.m.: Germany April trade

10:00 a.m.: Russia sells bonds

11:00 a.m.: Italy sells bills, U.K. sells linkers

11:30 a.m.: Germany sells bonds

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

Poland rate decision

Corporate Events

Earnings include Inditex, GameStop

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