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Morning Report – Friday 19 February

Jon Robson, Head of Trading

“The string of soft labour data is weighing on the dollar even as other indicators have shown resilience. Historically, the greenback has often been weaker during times of global economic recovery and we can expect to see more of that over the course of the year.”

Main Headlines

US first-time jobless claims hit highest level in 4 weeks as labour market’s slow recovery struggles. It was the second consecutive week that applications rose. California, Illinois and Ohio were among the states reporting the biggest increases in jobless claims. US employment remains almost 10m below its pre-pandemic levels.

Rishi Sunak will on Friday announce he is delaying until later this year a final report on a review of business rates — a key part of his promise to “level the playing field” between the high street and online retailers. The chancellor will argue that postponing the report, which will consider the case for an online sales tax, to the autumn will allow him to make decisions when the economic uncertainty caused by the pandemic has receded.

GBP

Sterling is higher versus the dollar and lower against the euro in the early morning trade. Sir Keir Starmer called on Thursday for the introduction of a British recovery bond to help rebuild the UK’s post-Covid economy, in a major speech aimed at resetting his Labour leadership. Starmer has come under fire from critics in recent weeks for failing to set out a clear policy agenda for running the country and for letting prime minister Boris Johnson off the hook over his handling of the coronavirus crisis.

EUR

The euro is stronger against most majors this morning. Macron urged Europe and US to send vaccines to Africa now. Hope of a return to normality for the Alpine industry were dashed by a last-minute U-turn from Mario Draghi’s new administration, which postponed the reopening over fears of emerging virus variants and a spike in infections after giving the go-ahead for the skiing industry to reopen on February 15.

USD

The dollar is under pressure this morning. Treasury Secretary Janet Yellen said Thursday that recent signs of improvement in the U.S. economy are no reason to scale back the administration s $1.9 trillion relief plan because the economy remains in a “deep hole” with many people still hurting. The Biden administration rejected the French proposal to send vaccines to developing countries as their priority is to vaccinate Americans.

Markets

Stocks were mixed and U.S. equity futures edged lower Friday after a decline on Wall Street as investors mulled the impact of the recent climb in Treasury yields on the market outlook. Oil added to recent losses. A gauge of global shares headed for its first weekly fall since January, with Australia lagging in Asia while South Korea outperformed. S&P 500 futures dipped after the index declined Thursday. European contracts pointed higher. Ten-year Treasury yields held an advance. Japan’s 10-year sovereign bond yield rose to the highest in more than two years amid the global debt selloff. Bitcoin fell back below $52,000. Copper extended a rise to a nine-year high.

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

8:45 a.m.: France Jan. CPI

9:15 a.m.: France Feb. PMIs

9:30 a.m.: Germany Feb. PMIs

10:00 a.m.: Euro-Area Dec. Current Account, Feb. PMIs

10:00 a.m.: Italy Jan. CPI

10:30 a.m.: U.K. Feb. PMIs

12:00 p.m.: U.K. sells bills

3:45 p.m.: U.S. Feb. PMIs

7:00 p.m.: Baker Hughes U.S. Rig Count

Corporate Events

Earnings include Eni, Swiss Re

U.K.’s top court rules on whether Uber drivers should be classed as “workers” entitled to minimum wage and holiday pay.

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