Main Headlines:
A plan by Senate Democrats to impose a tax targeting 700 billionaires collapsed after a backlash from moderate members of the party, as chaos enveloped the negotiations over Joe Biden’s $2tn spending package. Democrats also abandoned plans to include a paid-leave program in their social spending and climate bill, while a potential surtax on wealthy Americans’ income gained traction. The White House is pushing for Democrats to come together around the bill by the end of the week, which could also unlock possible passage of a parallel bipartisan infrastructure package that has been held up by progressives in the House.
The UK chancellor used his third Budget to pump more money into public services recovering from the Covid-19 crisis and protect them from rising inflation, increasing departmental budgets by 3 per cent a year in real terms over the next three years. Taxes are heading for the highest level since 1950 and the Conservative government plans to go to the next election in 2024-25 with public spending accounting for 2.5 per cent more of the economy than in 2019-20. The spending spree will overheat the economy, with growth running above capacity for the next three years. That will drive up inflation but dramatically shrink borrowing, according to the Office for Budget Responsibility.
Markets
GBP
Sterling is weaker against most major currencies this morning. Scotland’s rail operator Scotrail agreed a pay deal with a railway workers’ union on Wednesday, averting a strike that had threatened to disrupt the COP26 climate summit in Glasgow. Sabic, the Saudi petrochemicals group, has agreed to invest at least £150m in a UK chemicals plant that was closed a year ago. The investment in the Teesside plant, which is expected to resume operations by the end of 2022, comes as prime minister Boris Johnson’s government looks to strengthen trade relations with the Gulf.
EUR
The euro is higher versus most majors overnight. France is threatening to take action against the UK in a dispute over fishing rights, which could include tougher customs checks on imports and cutting off electricity supplies. French government spokesperson Gabriel Attal on Wednesday said a full list of retaliatory measures would be released as early as today. Russian state gas company Gazprom has proposed that Moldova adjust its free trade deal with the EU and delay energy market reforms agreed with Brussels in exchange for cheaper gas for the country. The European Parliament has postponed a key vote on technology regulation next month, allegedly because of an upcoming visit of the whistleblower responsible for Facebook’s latest troubles.
USD
The dollar is weaker against the euro and stronger against the pound in the early morning trade. A sharp rise in the cost of fuel is putting pressure on Joe Biden to respond – the adverse economic effect on consumers is compounded by supply-chain bottlenecks and robust inflation. The two largest US auto makers, General Motors Co. and Ford, reported steep drops in third-quarter profit as the computer-chip shortage dented factory output, and each said the problem would leave dealership lots nearly bare well into 2022. Hundreds of thousands of people in New England were left without power Wednesday, as a strong storm barreled up the East Coast with hurricane-force winds that downed trees and power lines.
Ballinger & Co. Morning Report–28th October 2021
Today’s Rates
GBP>EUR – 1.1851
GBP>USD – 1.3763
EUR>USD – 1.1611
GBP>CAD – 1.7028
GBP>AUD – 1.8308
GBP>SEK – 11.809
GBP>AED – 5.0551
GBP>HKD – 10.704
GBP>ZAR – 20.791
GBP>CHF – 1.2623
Today’s Calendar
· EUR ECB Interest Rate Decision
· EUR ECB Monetary Policy Decision Statement
· EUR ECB Deposit Rate Decision
· EUR Harmonized Index of Consumer Prices (YoY)(Oct)
· USD Gross Domestic Product Annualized(Q3)
· EUR ECB Press Conference
Today’s Highlights
· Forex Today: ECB policy decisions and US GDP data to ramp up volatility
· US Third Quarter GDP Preview: A most uncertain estimate
· US GDP Preview: Forecasts from eight major banks, losing momentum in Q3
· UK’s Sunak: Government debt is large
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