November 24, 2021

“The euro found support from stronger than expected business surveys, maintaining just above a 16-month trough. The reappointment of monetary policy ‘hawk’ Jay Powell to Federal Reserve Chair was seen as the more combative choice, causing the dollar to surge before a pause on Wednesday.”

Sam Cornford, Partner & Head of Trading

Main Headlines

In a move to drive down petrol prices that have become a big contributor towards inflation, President Biden has announced the US will release oil from its strategic stockpile. Yesterday Biden announced the release of 50m barrels of oil, which equates to 2.5 days’ worth of US oil consumption, in the coming weeks. Analysts debated whether the decision was made to show the White House are attempting to stop inflation and questioned whether the release is enough to cover the surging demand. Despite the President predicting that the added supply would lead to lower prices, the wholesale crude prices on financial markets rose after yesterday’s announcement.

Yesterday it was revealed David Cameron lobbied a Conservative donor he ennobled while Prime Minister. In January, the former prime minister successfully lobbied Lord Lupton, a director of Lloyds Banking Group, who has donated more than £3m to the Conservative Party, to persuade the bank to continue doing business with Greensill Capital. The company whom he was an adviser for until its collapse in March 2021, had a scheme for NHS pharmacies where the bank provided money to pay pharmacies for fulfilling prescriptions. Cameron’s intervention with Lord Lupton meant Lloyds maintained a role in the scheme. While Cameron is claiming the scheme saved the Government £100mn a year, this has been disputed by the UK’s public spending watchdog.

GBP

Sterling is well bid against most major currencies in early morning trade. Governor of the Bank of England (BoE), Andrew Bailey, has suggested he would prefer ‘regulated’ central bank digital currency whilst speaking to the Lords’ Economic Affairs Committee yesterday. He addressed there would be issues around privacy and managing personal data in the while establishing the digital central bank currency, but the sharp rise of bitcoin and other crypto currencies needed greater regulation. The UK has entered a third phase of excess deaths during the pandemic, as more people died during the week ending November 12^th and the figure is not explained by Coronavirus alone.  These excess deaths suggest that more people have been losing their lives because of strain on the NHS, although this reasoning is contested.

EUR

The euro is weaker against most major currencies overnight. EU-U.K. talks on Northern Ireland trade rules will “probably” continue into next year, according to the European Commission’s Maroš Šefčovič. He stated the EU had been “probably too ambitious” when previously stating that discussions on customs and food checks or the role of the Court of Justice of the European Union could be wrapped up before Christmas. Despite surging inflation, business activity in the eurozone has picked up this month. The eurozone IHS Markit flash composite purchasing managers’ survey, which takes into the monthly pulse of business activity, showed costs and average selling prices for goods and services rising at the fastest pace in the survey’s history. European Commission President Ursula von der Leyen on Tuesday said the fourth wave of COVID-19 slamming Europe was “a pandemic of the unvaccinated” and urged people to get inoculated or a booster shot.

USD

The dollar is weaker against sterling and higher against the euro this morning. Global shares are mixed as worries about inflation set off expectations the U.S. Federal Reserve might accelerate its plans to raise interest rates. The Fed will release minutes later in the day from its October policy meeting, potentially giving investors more details on the central bank’s plan to start trimming bond purchases that have helped keep interest rates low. Stocks are likely to see more mixed trading this week, with U.S. markets closing on Thursday for Thanksgiving and then closing early on Friday. The Labor Department will release its weekly report on unemployment benefits and the Commerce Department releases data on third-quarter gross domestic product and its new home sales report for October.

Markets

Stocks were mixed Wednesday and Treasury yields declined as traders weighed economic risks from tighter monetary policy while awaiting key U.S. data as well as the latest Federal Reserve minutes. However, a climb in Treasuries unwound much of their overnight trade. The prospect of the Fed reducing stimulus more quickly to fight price pressures has tempered bond market inflation expectations, though they remain historically elevated. Energy and financials helped the S&P 500 eke out a gain overnight, while the Nasdaq 100 extended a drop. MSCI Inc.’s Asia-Pacific share gauge fell for a third day, sapped by Japan. U.S. futures fluctuated and European contracts rose. Gold gained slightly but remains under pressure from higher yields. Oil gained as a planned coordinated release of strategic reserves by the U.S. and other nations fell short of expectations.

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

8:45 a.m.: France Nov. manufacturing confidence

10:00 a.m.: Germany Nov. IFO business climate survey

11:10 a.m.: ECB’s Panetta speaks

2:30 p.m.: U.S. initial jobless claims, 3Q GDP, Oct. wholesale inventories, durable goods

3:30 p.m.: BOE’s Tenreyro speaks

4:00 p.m.: U.S. Oct. personal income/spending, PCE deflator

4:30 p.m.: EIA report on U.S. oil inventories

5:00 p.m.: ECB’s Schnabel speaks

5:00 p.m.: Russia Oct. industrial production

Genscape Europe ARA region crude inventory report

Corporate Events

Earnings include: Deere, AutoStore, Futu, Alibaba Health and Eneti

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