Sterling is stronger than most majors this morning. Many more households will be forced into “desperate” measures such as rationing their heating this winter, charities have warned, as a global gas supply crunch, low wind output and strong demand continued to push energy prices across Europe higher. In the UK, day-ahead power prices hit £540 per megawatt hour on Monday, the highest level since 2008, according to the consultancy Cornwall Insight. The equivalent gas price reached a new all-time high of £1.51 per therm. UK and continental European energy prices have been hitting a series of fresh peaks in recent months driven by a combination of a global gas shortage, a bounceback in energy demand after coronavirus lockdown restrictions were eased and some of the poorest conditions for wind generation in the North Sea for more than two decades.
The euro is well bid against the dollar but weaker than the pound in the early morning trade. Europe’s soaring electricity and gas prices are putting the heat on EU governments, with Spain announcing temporary tax cuts to cushion the blow to consumers as other countries also seek to minimise the political damage from the rise. In a television interview on Monday night, Pedro Sánchez, Spanish PM, said taxes on electricity would be cut by €1.4bn until the end of this year while €650m taken from energy companies’ “extraordinary profits” would be “redirected to consumers”. The steady rise in Spain’s electricity prices, which have hit record levels on the wholesale market throughout the summer, has become the country’s most burning political issue, putting pressure on Sánchez’s leftwing minority government, which is behind in the polls.
The dollar is lower than most majors overnight. The failure by the US to bring Covid-19 cases under control is scrambling business expectations of a rapid economic revival, forcing companies to reset plans and revise forecasts as they also grapple with a new federal vaccine mandate. Revenues have fallen at a quarter of US small businesses in each of the past three weeks while just 8% saw revenue growth, according to an Economic Innovation Group study. A growing minority now expects a full economic recovery to take more than six months. The country’s largest airlines this week disclosed a slowdown in demand as cases of the highly contagious Delta variant climbed. United Airlines reined in its capacity plans for the key Thanksgiving and Christmas holidays and American Airlines and Delta Air Lines flagged lower than expected revenues for the quarter.
Ballinger & Co. Morning Report–14th September 2021
GBP>EUR – 1.1733
GBP>USD – 1.3871
EUR>USD – 1.1823
GBP>CAD – 1.7542
GBP>AUD – 1.8883
GBP>SEK – 11.891
GBP>AED – 5.0950
GBP>HKD – 10.788
GBP>ZAR – 19.656
GBP>CHF – 1.2787
· USD Consumer Price Index ex Food & Energy (MoM)(Aug)
· USD Consumer Price Index ex Food & Energy (YoY)(Aug)
· Forex Today: Dollar pressured ahead of crucial inflation release, oil rises, cryptos stabilize
· GBP/USD Forecast: Sterling bulls fully dependent on dollar weakness, critical US CPI eyed
· EUR/USD to enjoy considerable gains on a break above 1.1910 – SocGen
· US Inflation Preview: CPI critical for taper, three scenarios for the dollar
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