Main Headlines:
The Federal Reserve has adopted new rules banning its policymakers and senior staff from buying individual shares and a string of other investments, as the US central bank tries to stamp out a growing furore over trading by top officials. In a statement on Thursday, the Fed said its senior officials would be limited to “purchasing diversified investment vehicles, like mutual funds”. The new rules are being introduced after questionable financial trades last year led to the resignations in September of Eric Rosengren, the president of the Federal Reserve Bank of Boston, and Robert Kaplan, the president of Dallas Fed.
The Bank of England’s chief economist revealed that a decision about a rate increase next month – widely anticipated by financial markets – is live and “finely balanced.” The hawkish-leaning monetary policy committee member Huw Pill told the Financial Times that UK inflation is likely to rise “close to or even slightly above 5 per cent” early next year, which would be “a very uncomfortable place for a central bank with an inflation target of 2 per cent.” Pill advised traders not to get too engrossed in the exact timing of any rate rise, urging them to look at the core underlying trends in the UK economy to see that they no longer needed rates at the historic low of 0.1 per cent.
Markets
GBP
Sterling is weaker against the euro and unchanged against the dollar this morning. UK retail sales fell unexpectedly for a fifth month as consumer confidence plunged, adding to evidence that the economic recovery is losing momentum. The volume of goods sold in stores and online fell 0.2% last month, the Office for National Statistics said on Friday. Economists had expected an increase of 0.6%. Meanwhile, consumer confidence dropped to the lowest level since the last lockdown and a near-record share of manufacturers reported material and labour shortages, according to the GfK index.
EUR
The euro is higher versus most major currencies overnight. Economists believe the European Central Bank will increase the pace of their regular bond-buying program next year and make it more flexible to be able to better address market stress. EU leaders today are set to discuss the bloc’s digital agenda, just weeks ahead of a proposed update to the competition rules that will also have an impact on tech companies. The point of today’s discussion is to give a nudge to the stalled regulation, bogged down in internal quarrels within the European parliament and among member states.
USD
The dollar is weaker against most majors in the early morning trade. Biden vowed to defend Taiwan from Chinese military action, in comments that contradicted US policy to maintain an ambiguous stance. The US has agreed to drop the threat of trade tariffs against five European countries over their digital service taxes on big tech groups such as Amazon and Facebook, in a move designed to make it easier for countries to implement a groundbreaking deal to reform global corporate taxes. The 10-year “break-even” US inflation rate rose to 2.62 per cent on Thursday, its highest level since September 2012 and above the Federal Reserve’s long-run inflation target of 2 per cent.
Ballinger & Co. Morning Report–22nd October 2021
Today’s Rates
GBP>EUR – 1.1851
GBP>USD – 1.3795
EUR>USD – 1.1640
GBP>CAD – 1.7017
GBP>AUD – 1.8385
GBP>SEK – 11.836
GBP>AED – 5.0669
GBP>HKD – 10.725
GBP>ZAR – 20.106
GBP>CHF – 1.2650
Today’s Calendar
· EUR Markit Manufacturing PMI(Oct)
· EUR Markit PMI Composite(Oct)
· EUR Markit PMI Composite(Oct)
· GBP Markit Services PMI(Oct)
· CAD Retail Sales (MoM)(Aug)
· USD Fed’s Chair Powell speech
Today’s Highlights
· Forex Today: Dollar consolidates Thursday’s gains as focus shifts to PMI data, Fedspeak
· EUR/USD Forecast: Euro buyers hesitate as key resistance stays intact
· GBP/USD treads water near 1.3800 after mixed UK data
· UK Preliminary Services PMI unexpectedly jumps to 58.0 in October vs. 54.5 expected
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