September 13, 2021

“The dollar started the week on a firm footing before the immediate focus turns to US inflation figures later in the week. Investors also remain wary that the Federal Reserve is priming to exit from its super-supportive policy stance. The Delta variant situation remains a bigger concern in the US than in other economies and may still become a weight on the currency.”

Tim Hallinan, Trading Director

Main Headlines

President Biden accused Republican governors of being cavalier with the health of their constituents after several threatened to sue the administration if Biden compelled companies too vaccinate or test their employees. A fierce conservative backlash from the Republican party in particular, as well as an increase in the trend of vaccine resistance from federal lawmakers has met Biden’s announcement that companies with over 100 employees will have to vaccinate or test their employees. The administration’s stance on vaccinations has been deemed ‘dictatorial’ by the GOP but comes amongst a stall in vaccination rates as the Delta variant continues to surge in the United States.

CBI head, Tony Danker, warns Rishi Sunak of further backlash over a lack of detail on economic choices and claimed the Chancellor is playing with fire by creating threats to investment, with a particular focus on raising taxes for the corporate sector. Danker claimed the Chancellor is taking the easy option by turning to companies to fund higher public spending. Rishi Sunak has proposed an increase in corporation tax from 19p and 25p, and last week raised national insurance rates for employers and employees by 1.25% to fund higher health and social care spending. This comes after PM Boris Johnson claimed last week that the Conservative party remained the party of low taxation.

GBP

Sterling is lower against the dollar and higher against the euro overnight. The government has cancelled plans to introduce vaccine passports at nightclubs and major events amid fears of backlash from libertarian Conservative MPs and opposition parties. Health Secretary, Sajid Javid, told the BBC on the Sunday that the certification for jabs would not be introduced by the end of September as previously announced. Boris Johnson has now said he will bring forward a “toolbox” of options to help the country avoid having to enter an autumn or winter lockdown. The UK has cancelled an agreement with French-based biotech company Valneva for the supply of 100 million doses of Covid-19 vaccines. The UK government said Valneva was in breach of its obligations under the €1.4bn deal.

EUR

The euro is lower against most majors in early morning trade. The optics are looking good for the Social Democrats ahead of Germany’s Chancellery elections this month. Olaf Scholz emerged as the clear victor according to viewers in a three-way leaders debate on Sunday night. The Social Democrats (SPD) are up 6% in the polls and a blitz poll after the debate had Scholz leading the candidate across metrics from likeability to competence. The European Parliament is due to debate Fit for 55 in Strasbourg on Tuesday morning, its landmark climate change package, amidst the economic and political realities of rising energy prices across the bloc for citizens.

USD

The dollar is well-bid against most major currencies overnight. California will vote whether to oust a Democratic governor, Gavin Newsom on Tuesday who plans to introduce statewide shielding policies to safeguard citizens from Covid-19, amid anger across the country over Covid-19 restrictions. House Democrats expect to propose raising the corporate tax rate to 26.5% from 21% and imposing a 3-percentage-point surtax on individual income above $5 million, according to two House Democratic aides familiar with the plans. The tax increases would be part of the House Ways and Means Committee’s plans to pay for the party’s priorities in a fast-moving budget bill.

Markets

Stocks fell and U.S. futures wavered Monday as the risk of a slower recovery from the pandemic shadowed global markets and Chinese technology stocks buckled under Beijing’s regulatory clampdown. European futures were little changed, and U.S. contracts struggled to make gains amid caution over reopening challenges from the delta virus strain. Oil rose to about $70 a barrel and aluminium rallied. Commodity markets are having a tough time balancing strong demand with sticky supply, Goldman Sachs Group Inc. said. Treasury yields pared an advance as traders assess price pressures and their impact on the likely timeline for a reduction in Federal Reserve stimulus. An update on U.S. consumer prices this week will feed into the debate about whether elevated costs are transient.

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

8:30 a.m.: Euro-area Bloomberg September economic survey

10:00 a.m.: Italy 2Q employment rate

11:00 a.m.: Norway to sell bills

11:30 a.m.: Germany to sell bills

2:50 p.m.: France to sell bills

5:00 p.m.: Riksbank’s Skingsley speaks on digital currencies

Norway general election

Bank of France August industry sentiment indicator

OPEC Monthly Oil Market Report

EIA releases monthly Drilling Productivity Report

Corporate Events

Earnings include ITM Power, Oracle

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