Main Headlines
Investors are bracing for turmoil in the market for mortgage loans backed by the government as the Federal Reserve begins to sketch out its plans to shrink its $9tn balance sheet. A debate is under way about how the US central bank will go about reducing its enormous stock of Treasuries and agency mortgage-backed securities. These were amassed over the past two years as the Fed sought to quell financial panic stemming from the pandemic and shield the world’s largest economy from one of the worst contractions in history. The Fed has pledged to reduce its holdings of both Treasuries and MBS, and to move towards a smaller all-Treasury portfolio in a “predictable manner” but has yet to divulge any details about the timing and pace of a reduction. According to data, a hot housing market last year, driven by low interest rates and high savings, pushed issuance of mortgage-backed securities to an all-time high of about $4tn with a net supply of about $900bn.
Downing Street is set to bring forward legislation designed to crack down on the flow of “dirty money” into the UK in a fresh rebuke to Russian president Vladimir Putin for his invasion of Ukraine. Number 10 will put forward a new “economic crime bill” that will introduce a register of overseas entities highlighting the ultimate owners of overseas companies that control property and land in the UK. The long-awaited measure was first proposed several years ago in order to tackle the £100bn of illicit financing that the National Crime Agency estimates is channelled through the UK each year. The new register will require anonymous foreign owners of UK property to reveal their identities to ensure that criminals cannot hide behind secretive chains of shell companies. Those who did not declare their beneficial owner would face restrictions over selling their property and up to five years in prison. The bill will also include measures to strengthen the system of “unexplained wealth orders.”
Markets
GBP
Sterling is stronger against euro and weaker against the dollar this morning. Labour has branded changes to new immigration rules brought in to help Ukrainians seeking refuge in the UK as “shameful”, as Boris Johnson pledged further arms support for the country. British MPs have demanded that the government makes it easier for UK residents to bring family members fleeing Russia’s invasion of Ukraine to join them in Britain. Staff surveillance is at risk of “spinning out of control” Britain’s largest federation of trade unions has warned, adding to concerns that the UK has fallen behind its EU counterparts in this area of workers’ rights. A survey found that British businesses have become sceptical that the government and EU will resolve problems at the UK border and instead believe it will fall to them to reduce costly delays. Boris Johnson’s government has shelved a strategic plan to create a British rival to Silicon Valley around Oxford and Cambridge in order to prioritise “levelling up” spending in the north of England.
EUR
Euro is weaker than most major currencies in the early morning trade. Over the weekend, France, Germany, and other nations that had so far insisted on sending only non-lethal aid to Ukraine U-turned and said they would also send weapons. Last night, another Rubicon was crossed when EU foreign affairs ministers approved allocating €450mn from the bloc’s budget for arming Ukraine, for the first time ever. European stock futures tumbled, and oil prices rose after Russian president Vladimir Putin put his country’s nuclear forces on high alert and the west levied its toughest sanctions yet following Moscow’s invasion of Ukraine. Meanwhile, Russia’s central bank on Monday sharply raised its key policy rate to 20%, a day after announcing a slew of measures to support domestic markets, as it scrambled to manage the fallout of harsh Western sanctions in retaliation against Moscow’s invasion of Ukraine. Norway’s Equinor has decided to stop new investments in Russia and start exiting from joint ventures because of Russia’s invasion of Ukraine.
USD
The dollar is well bid against most major currencies overnight. The Biden administration on Sunday condemned Vladimir Putin’s decision to place Russia’s nuclear deterrence forces on high alert. The White House also faced growing calls from senior Republicans to target Russia’s energy sector with new sanctions. The US’s biggest offshore wind lease sale attracted record bids of more than $4bn, outstripping any oil and gas auction in American waters, as renewable energy developers compete to secure a prime location to install turbines. The federal government auction of 488,000 acres in the Atlantic Ocean near New York and New Jersey drew in high bids totalling $4.37bn after a three-day auction process ending on Friday, according to the Bureau of Ocean Energy Management. An inflation gauge jumped 6.1% in January compared with a year ago, the latest evidence that Americans are enduring sharp price increases that will likely worsen after Russia’s invasion of Ukraine.
Today’s Rates
GBP>EUR – 1.1970
GBP>USD – 1.3376
EUR>USD – 1.1172
GBP>CAD – 1.7076
GBP>AUD – 1.8581
GBP>SEK – 12.775
GBP>AED – 4.9118
GBP>HKD – 10.451
GBP>ZAR – 20.644
GBP>CHF – 1.2379
Today’s Calendar
• 8:00 a.m.: Denmark 4Q GDP
• 8:00 a.m.: Finland Dec. trade balance
• 8:00 a.m.: Sweden 4Q GDP; Jan. trade, retail sales
• 8:00 a.m.: Norway Jan. credit indicator growth
• 9:00 a.m.: Switzerland 4Q GDP
• 9:00 a.m.: Spain Feb. CPI
• 10:00 a.m.: Norges Bank March daily FX purchases
• 10:00 a.m.: Spain Dec. current account
• 10:30 a.m.: Portugal Feb. CPI
• 11:00 a.m.: Macron holds defense and national security council
• 12:00 p.m.: Portugal 4Q GDP
• 12:30 p.m.: ECB’s Panetta speaks
• 2:50 p.m.: France sells bonds
• 4:50 p.m.: ECB’s Christine Lagarde speaks
• 5:15 p.m.: Biden speaks with allies about Ukraine conflict
• EIA releases Petroleum Supply Monthly
Corporate Events
• Earnings include Zoom, Workday, Lucid, HP Inc., SBA, Erste Group
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