Morning Report

September 16, 2021

“The dollar drifted towards the middle of its monthly range for September versus major peers on Thursday, as traders looked to next week’s Federal Open Market Committee Meeting for clues on tapering.”

Tim Hallinan, Trading Director

Main Headlines

President Biden’s plan to introduce legislation which lowered the prices of key pharmaceuticals and drugs for seniors was dealt a blow on Wednesday as it hit a hurdle in Congress. Although the majority of Democrats in the House of Representatives do support the bill, three Democrat members of the energy and commerce committee opposed it, as did Republicans which was enough to scupper the bill at this stage. This was a major victory for US pharmaceutical companies who have managed to fend off efforts in Congress to use Medicare to lower prices of drugs for the elderly in the US.

UK inflation has surged to 3.2% as food and transport costs rose quickly across the month of August than at any time since the Bank of England gained independence to set interest rates, rising 1.2% points to its highest level since 2012. With the CPI inflation more than 1% over the target of 2%, Andrew Bailey, the Governor of the Bank of England will be forced to write to the Chancellor to explain the hike in prices and the central banks plans to get back towards the inflation target. In August, the main rise in prices was in food, transportation costs, recreation, furniture prices and restaurant prices.


Sterling is lower against most majors overnight. Boris Johnson reshuffled his cabinet drastically yesterday, in a move which saw Liz Truss appointed foreign secretary, the axing of Gavin Williamson, Robert Buckland and Robert Jenrick and Dominic Raab’s emergence as Deputy PM, Lord Chancellor and Justice Secretary. The UAE is set to announce a significant investment program in the UK, focused on expanding a multibillion-pound partnership with the British government in critical areas such as UK infrastructure, clean energy and technology. The overall commitment over 5 years is set to be 10 billion. The UK, US and Australia have established a tripartite defence agreement to counter Chinese influence in the Indo-Pacific.


The euro is lower against the dollar but higher against sterling in early morning trade. Ursula von der Leyen gave her State of the Union address from Brussels on Wednesday, speaking on the strength of Europe’s soul and the strategic weaknesses facing the bloc. She urged greater military independence from the U.S. and less reliance on Asia for computer chips. She conceded that the fight against climate change will depend on the entire world, especially China. Von der Leyen lamented the inability of the 27 capitals to come together on a single migration and asylum policy — a gap she said the EU’s rivals and human traffickers are now exploiting. In particular, she claimed credit for the EU’s successful vaccination campaign, touched upon the need for consistent standards on the rule of law and media freedom in the Union and spoke to the hotly contested election in Germany in 11 days’ time.


The dollar is well-bid against most major currencies overnight. In California yesterday, Gavin Newson defeated an effort to have him recalled as the State Governor with more than 67% of voters stated they did not want him to be recalled. He termed the win a defeat for “Trumpism” which will now inspire confidence for the rest of the Democrat party. The US and EU have planned to curb methane pollution by 30% in the next decade, with an announcement due to be made on Friday. The pact is designed to push methane up the agenda at the COP26 summit to be held in Glasgow in November. US allies’, Taiwan and Japan, welcome a tripartite AUKUS security pact aimed to provide greater deterrence to China in the Indo-Pacific.


Asian stocks retreated Thursday as the debt crisis at China Evergrande Group and Beijing’s latest push to rein in private industries hurt sentiment. Crude oil was around a six-week high. Shares fell in Japan, China, and Hong Kong, where technology stocks slid as China slowed approvals for video games to enforce stricter criteria for content. U.S. futures edged lower while European contracts rose. The S&P 500 posted the biggest jump since August overnight. Oil consolidated its powerful rally amid broad gains in energy commodities. The dollar ticked up and Treasuries were steady.

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

9:00 a.m.: Spain 2Q labor costs

9:00 a.m.: Hungary central bank chief speaks

10:00 a.m.: ECB’s Rehn speaks

10:00 a.m.: Norges Bank’s Olsen speaks

10:30 a.m.: Spain sells bonds

10:50 a.m.: France sells bonds

11:00 a.m.: Euro-area July trade balance

11:00 a.m.: Ireland sells bills

11:00 a.m.: Sweden sells linkers

11:00 a.m.: Hungary sells bills, floating bonds

11:50 a.m.: France sells linkers

2:00 p.m.: Poland August CPI

2:00 p.m.: ECB’s Lagarde speaks

2:30 p.m.: U.S. initial jobless claims, August retail sales

Corporate Events

Earnings include Advance Residence Investment, Ashtead, Firstrand, THG, H&R Block

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