Morning Report

September 28, 2021

“The dollar has been propped up by rising treasury yields, which climbed to their highest since late June. The resignations of Rosengren and Kaplan mean that two of the Fed’s hawks will soon be out of the picture as it calibrates withdrawing pandemic policy aid. Meanwhile, the potential political shift to the left in Germany – likely to bring about a more relaxed fiscal stance – could benefit the euro after the coalition talks conclude.”

Sam Cornford, Partner and Head of Trading

Main Headlines

Senate Republicans blocked a bill that would suspend the debt ceiling into December 2022 and keep the government operating past September 30, forcing Democrats to find a new strategy to address two fast-approaching deadlines with acute economic consequences. Treasury secretary Janet Yellen called on lawmakers to raise the debt limit in order to avert what she said would be a “catastrophic event for [the] economy.” The bill failed to clear the Senate after a weeks-long stand-off between Democrats and Republicans, in which the GOP steadfastly refused to endorse the measure and accused Joe Biden’s party of reckless public spending.

The UK officially put the military on standby to help deliver supplies to gasoline stations in an effort to stem the fuel crisis. A “limited number” of army tanker drivers will be trained up in case they’re needed, the Department for Business, Energy and Industrial Strategy said late on Monday. Non-military holders of specialized licenses that allow them to drive hazardous substances will also have their permits extended. UK medical workers and transport companies have warned the crisis threatened major disruption to essential services and industry as they demanded priority access to petrol and diesel following panic buying.


Sterling is stronger versus the euro and weaker against the dollar this morning. Bank of England Governor Andrew Bailey moved to reinforce the option that interest rates could rise as early as this year while cautioning about the limits of monetary policy to balance diverging forces in the UK economy. Sir Keir Starmer was faced with dissent at the Labour party’s annual conference on Monday as a member of the shadow cabinet resigned and delegates defied the leadership’s line on two foreign policy issues. More than 65 hospitality leaders, including the Savoy and Soho House, have warned the UK government that the sector is “close to imploding” under the strain of acute labour shortages.


The euro is lower against most major currencies overnight. The Greens and the liberal Free Democrats – who hold Germany’s balance of power after Sunday’s historic vote – said they would start talks to decide who they want to join in government after the Social Democrats’ narrow election win. The EU’s top trade and digital officials have landed in the US ahead of tomorrow’s inaugural Trade and Technology Council with the Biden administration. France has demanded last-minute changes to a draft joint statement the bloc will adopt at the meeting, designed to pave the way for more transatlantic co-operation in areas of strategic interest.


The dollar is higher against most majors in the early morning trade. Two regional Federal Reserve presidents – Boston Fed chief Eric Rosengren and Dallas’s Robert Kaplan -are retiring following embarrassing revelations of stock trading last year. Jerome Powell will testify on the Fed’s economic response to the pandemic before a Senate panel today. Elsewhere, Congress Democrats are considering a plan that would require banks to report accounts with at least $10,000 to the Internal Revenue Service – well above the Biden administration’s proposed $600 threshold – while also exempting some common transactions from the law.


Asia stocks and US futures were mixed on Tuesday as Treasury yields climbed with investors pricing in the start of Federal Reserve tapering and elevated energy prices stoking inflation concerns. MSCI Inc.’s index of Asia Pacific stocks snapped a three-day advance. Australia underperformed and Japan also slid. Hong Kong advanced, led by property stocks, after China’s central bank said it will work to safeguard the “healthy” development of the property market amid the China Evergrande Group crisis. Chinese stocks had a more modest gain. European futures ticked higher. The benchmark 10-year U.S. yield topped 1.5%, the highest level since June, and the two-year yield hit an 18-month high as traders increasingly priced in the prospect of the Fed trimming its $120 billion in monthly asset purchases soon.

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

8:00 a.m.: Germany Oct. GfK consumer confidence
8:45 a.m.: France Sept. consumer confidence
9:00 a.m.: Riksbank’s Breman gives speech
9:30 a.m.: Sweden Aug. retail sales and trade balance
10:00 a.m.: ECB’s Kazimir speaks
10:00 a.m.: Netherlands to sell bonds
11:00 a.m.: Italy to sell bills
11:00 a.m.: U.K. to sell bonds
11:00 a.m.: Hungary to sell bills
11:15 a.m.: Switzerland to sell bills
1:00 p.m.: Riksbank’s Skingsley speaks
1:00 p.m.: Russia to sell notes
2:00 p.m.: Lagarde opens ECB forum on central banking
2:30 p.m.: Guindos chairs session at ECB forum
2:50 p.m.: BOE’s Mann speaks
3:45 p.m.: Panetta chairs session at ECB forum
4:00 p.m.: Riksbank’s Ingves gives speech
5:00 p.m.: Schnabel chairs session at ECB forum
8:00 p.m.: ECB’s Panetta delivers remarks
OPEC releases World Oil Outlook

Corporate Events

Earnings include Micron, IHS Markit, Ferguson, Synnex, Hella, Smiths Group, Osram Licht


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