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Morning Report – Thursday 18 February

Jon Robson, Head of Trading

“A bounce back in retail sales, declining coronavirus infections and growing investor confidence in Biden’s $1.9 trillion relief plan have been providing temporary support to the dollar. Market participants remain cautious but data suggests that the US economy may recover from the pandemic faster than anticipated.”

Main Headlines

Biden has rejected calls from within the Democratic party to scrap student debt as the President works to navigate the $1.9trillion coronavirus relief bill through Congress. The frozen weather conditions in the US persist, disrupting vaccine distribution, leaving millions still stranded without electricity, crippling US crude oil output, and postponing President Biden’s planned trip to a Pfizer vaccine facility.

Former Brexit negotiator Lord David Frost has replaced Michael Gove as UK chairman of the Withdrawal Agreement Joint Committee to take charge of the UK’s relationship with the EU and is set to join the cabinet. The peer is expected to take a harder stance with Brussels, particularly with regard to customs in Northern Island, which has been a consistent source of tension between the EU and UK.

GBP

Sterling is very well bid against all majors in early morning trade. A survey from the Resolution Foundation indicates that 2.6 million workers in the UK expect to be made redundant in the next three months, with lowest earners at a heightened risk, highlighting the significant damage wrought by the pandemic on the UK economy. Coronavirus infections in the UK have fallen significantly since January according to a widely-cited survey by Imperial College and Ipsos Mori ahead of Johnson’s “road map” announcement on 22 February.

EUR

The euro is higher against the dollar and lower against the pound overnight. Healthcare workers in Germany and France have expressed concerns about the side-effects of the AstraZeneca Covid-19 vaccine, threatening the EU’s beleaguered inoculation rollout and path out of restrictions. Elsewhere, Mario Draghi made his first speech as Italian Prime Minister yesterday, promising to speed up Covid-19 vaccinations and announced ambitious structural reforms and today faces a confidence vote, which commentators expect him to easily win.

USD

The dollar is weaker against most majors this morning. President Biden’s top economic adviser, Brian Deese, has reached out to Taiwan for assistance in tackling the global shortage of semiconductor chips, which has disrupted supply chains and forced production cuts in the automotive and consumer electronics sectors.

Markets

Crude oil and copper jumped. Stocks in South Korea and Hong Kong underperformed, while those in China, reopening after the Lunar New Year break, gave up earlier gains. S&P 500 futures retreated after the index closed flat. European contracts slipped. The Nasdaq 100 ended lower Wednesday amid concern about the impact of higher yields on tech share valuations. Ten-year Treasury yields were steady after reaching 1.33% Wednesday and then retreating. Crude oil touched $62 a barrel as the damage to U.S. output from a cold blast morphed into a global supply shock. Copper in London hit an eight-year high as China’s traders returned from the holiday, with metals markets already buoyed by hopes for an economic recovery from the pandemic.

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

10:30 a.m.: Spain sells bonds

10:50 a.m.: France sells bonds

11:00 a.m.: ECB publishes 2020 financial report

12:00 p.m.: Turkey rate decision

12:00 p.m.: BOE’s Saunders speaks

1:30 p.m.: ECB minutes

2:30 p.m.: U.S. Initial Jobless Claims

4:00 p.m.: Euro-Area Feb. consumer confidence

5:00 p.m.: EIA Crude Oil Inventory Report

5:00 p.m.: Russia Jan. unemployment, retail sales

6:00 p.m.: Norges Bank’s Olsen speaks

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