Daily Market Update 08/12/2021

Main Headlines:

The House of Representatives made a deal yesterday that enables the federal government’s borrowing limit to be raised and avert a crisis over the debt ceiling. The measure they implemented means that the Senate could pass the bill through a majority vote and forego the ‘filibuster’ threshold. The measure also means the support of at least 10 Republican senators is necessary to become law. The Treasury secretary has warned the US government risks default and severely impacting economic recovery if lawmakers are unable to make an agreement. The first Senate vote is expected tomorrow and it will indicate how easy it will be for the Democrat’s to raise the borrowing limit.

Yesterday, TheCityUK lobby group announced the EU was no longer Britain’s biggest export market, having been replaced by the US following Brexit. Financial services exports to the EU fell 6.6% to £24.7bn in 2020, whereas exports to non-EU countries rose 4.1% to £57.7bn. In this, exports to the US increased 5.3% which meant that the US accounted for 34.2% of sector exports in 2020. In comparison export to the EU fell to 30%. This comes after the UK and the EU did not strike a deal for financial services following Brexit in 2020. The total value of UK financial services exports totalled $82.4bn in 2020, and were generally more resilient than other sectors in the face of Covid.

Markets

GBP

Sterling is higher against the dollar and weaker against the euro overnight. Officials are racing to draw up plans and restrictions to prevent the spread of the Omicron variant. Yesterday, the prime minister informed his cabinet that Omicron appears to be more transmissible than the Delta strain. A spokesman for Boris Johnson said that the government’s ‘Plan B’ which includes vaccine passports and a work from home mandate could be deployed. However this news comes alongside a leaked video, in which Boris Johnson’s advisers were caught joking about a Downing Street Christmas party. The lobby group London First is set to be renamed amid fears it clashes with the government’s ‘levelling up’ agenda. The company thought the name looked ‘inappropriate’ when there is talk about helping other UK cities.

EUR

The euro is well bid against most major currencies overnight. The Biden administration is encouraging Germany to prevent Russia’s Nord Stream 2 gas pipeline as part of a package of sanctions that would be imposed if Russia invades Ukraine. The US wants Berlin and Brussels to prohibit the pipeline from becoming operational and is part of a sanctions package the US is proposing to quell another conflict in the region. Meanwhile, yesterday Germany’s new finance minister has signalled a new openness towards EU fiscal rules, as he stated ‘stability’ should be combined with ‘growth and investment.’ He becomes minister at a time when there are calls to reform fiscal rules and a consultation is currently underway on how the arrangements in the Stability and Growth pack can be changed.

USD

The dollar is weaker than most major currencies in early morning trade. Yesterday, the House voted to approve a $778 billion National Defense Authorization Act. The bill is a budget and defense policy bill that authorizes $25 billion more in defense spending than the President requested. It also includes a commission to study US involvement in Afghanistan, after their tumultuous withdrawal in the Summer. Elsewhere, a new Wall Street Journal Poll finds that voters are heading into the midterm election pessimistic about the economy and the President’s leadership. The poll reveals that voters see economic and fiscal issues as better handled by the Republican Party.

Ballinger & Co. Morning Report- 08th December 2021

Today’s Rates

GBP>EUR – 1.1733

GBP>USD – 1.3242

EUR>USD – 1.1279

GBP>CAD – 1.6703

GBP>AUD – 1.8555

GBP>SEK – 12.023

GBP>AED – 4.8591

GBP>HKD – 10.317

GBP>ZAR – 20.934

GBP>CHF – 1.2230

  Today’s Calendar      

·      8:00 a.m.: Finland Oct. trade balance

·      9:15 a.m.: ECB’s Lagarde speaks at ESRB conference

·      9:25 a.m.: ECB’s Guindos speaks at banking and fintech event

·      12:30 p.m.: ECB’s Guindos speaks at ESRB conference

·      2:10 p.m.: ECB’s Schnabel speaks at ESRB conference

·      5:00 p.m.: Russia Nov. CPI

·      France Oct. business industry sentiment indicator

·      Bloomberg’s Sustainable Business Summit: Focus on Finance

·      Olaf Scholz replaces Angela Merkel as chancellor

·      Poland base rate announcement

·       EIA crude inventory report

  Today’s Highlights

·       Forex Today: Dollar wilts, Gold shines amid Omicron covid optimism, BOC in focus

·       EUR/USD Outlook: Bulls at the mercy of USD price dynamics, focus shifts to US CPI on Friday

·       ECB’s de Guindos: No evidence of second round inflation effects

·       GBP/USD hovers around 1.3250 amid USD weakness

 (https://frank-exchange.com/)

This document has been prepared solely for information and is not intended as an Inducement concerning the purchase or sale of any financial instrument. By its nature market analysis represents the personal view of the author and no warranty can be, or is, offered as to the accuracy of any such analysis, or that predictions provided in any such analysis will prove to be correct. Should you rely on any analysis, information or report provided as part of the Service it does so entirely at its own risk, and Frank eXchange Limited/Manor House Foreign eXchange Limited accepts no responsibility or liability for any loss or damage you may suffer as a result. Information and opinions have been obtained from sources believed to be reliable, but no representation is made as to their accuracy. No copy of this document can be taken without prior written permission.

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