“British consumers borrowed a record amount in February, indicating that the cost-of-living squeeze had hit wallets even before energy prices skyrocketed following Russia’s invasion of Ukraine –individuals borrowed net £1.5 billion on credit cards in February, representing the highest monthly amount since records began in 1993.”
Main Headlines
A closely watched recession signal flashed red yesterday, as investors fretted that the Federal Reserve’s efforts to tame inflation will bring about a sharp slowdown in US economic activity. Two-year Treasury note yields rose above those of the 10-year for the first time since August 2019, inverting a portion of the yield curve monitored closely by Wall Street and policymakers. Inversions typically signal malaise about the economy’s long-term growth prospects and have preceded every US recession in the past 50 years. Typically, a recession has followed in the two years after an inversion of this measure of the yield curve. Two-year yields, which move with interest rate expectations, rose as high as 2.45%, the highest level since March 2019. The two-year yield has risen by 1.64 percentage points this year as the US central bank has tightened monetary policy, including its first rate rise since 2018, in order to combat inflation that’s at a 40-year high. Investors argue, however, that the inversion may not be as reliable a recession indicator this time round because the Fed’s massive bond purchases during the coronavirus crisis have skewed the yields.
Boris Johnson faced fresh calls to resign on Tuesday after the police said 20 fines would be issued to people who attended government parties that breached coronavirus rules. The Metropolitan Police is investigating at least 12 government gatherings in 2020 and 2021 held when Covid-19 curbs were in force, including several at 10 Downing Street. The prime minister said last year that “the [Covid] guidelines were followed at all times” when media reports about gatherings were first published, but the Met has concluded that breaches of regulations had been made in the so-called partygate scandal. The Met said in a statement on Tuesday it would “initially begin to refer 20 fixed-penalty notices to be issued for breaches of Covid-19 regulations”, adding it would not name those who had been fined. The prime minister’s spokesperson confirmed Number 10 would announce any fixed penalty notice handed out to Johnson but declined to comment on whether he would resign in these circumstances.
Markets
GBP
Sterling is well bid against most major currencies overnight. A ceasefire agreement between Russia and Ukraine would not be enough to trigger the lifting of British sanctions, Boris Johnson told a meeting of his senior ministers yesterday. Johnson’s spokesman said, “the pressure on Putin must be increased both through further economic measures and providing military aid to ensure Russia changes course completely.” UK consumers borrowed a record amount in February, with some economists saying it was a sign of the cost-of-living crisis hitting wallets even before Russia’s invasion of Ukraine pushed energy prices higher. Individuals borrowed a net £1.5bn on credit cards in February, the highest monthly amount since records began in 1993, according to data published by the Bank of England yesterday. Steeply rising inflation is unlikely to knock the profits of housebuilders because house prices are climbing even faster, according to Bellway, one of the UK’s largest builders. They announced that their operating margin had increased from 17.3% in January 2021 to 18.7% this year.
EUR
The euro is stronger against the dollar and weaker against sterling this morning. Russia said it would work out practical arrangements by Thursday for foreign companies to pay for its gas in roubles, raising the probability of supply disruptions as Western nations have so far rejected Moscow’s demand for a currency switch. However, European countries, which mostly pay in euros, say Russia is not entitled to redraw contracts. The G7 group of nations rejected Moscow’s demands this week. German energy giant E.ON SE and a unit of Australia-based Fortescue Metals Group Ltd. plan to supply green hydrogen to Europe as the continent seeks to reduce its dependency on Russian energy. The companies will work together to deliver 5 million metric tons of hydrogen a year by 2030. Ukraine’s president Volodymyr Zelensky has warned the country “should not lose vigilance” following an announcement from Russia that it would dramatically scale back its military activities near Kyiv, following a round of peace talks.
USD
The dollar is weaker than most major currencies in the early morning trade. In President Joe Biden’s budget proposal, he said he was calling for higher defense spending to strengthen the US military and “forcefully respond to Putin’s aggression against Ukraine” with $1 billion in additional US support for Ukraine’s economic, humanitarian, and security needs. On Friday, Biden plans to unveil tougher fuel economy standards for vehicles that would reverse his predecessor Donald Trump’s rollback of US regulations aimed at improving gas mileage and cutting tailpipe pollution, officials said. The National Highway Traffic Safety Administration (NHTSA) have proposed rules that would reduce consumer fuel costs by $140 billion for new vehicles sold by 2030 and $470 billion by 2050. The Kremlin has said that Joe Biden’s comments that Vladimir Putin “cannot remain in power” are a cause for concern. Spokesperson Dmitry Peskov said: “This is a statement that is certainly alarming. We will continue to track the statements of the US president in the most attentive way.”
Ballinger & CO. Morning Report- 30th March 2022
Today’s Rates
GBP>EUR – 1.1803
GBP>USD – 1.3131
EUR>USD – 1.1125
GBP>CAD – 1.6389
GBP>AUD – 1.7468
GBP>SEK – 12.199
GBP>AED – 4.8219
GBP>HKD – 10.276
GBP>ZAR – 19.008
GBP>CHF – 1.2176
Today’s Calendar
· 9:00 a.m.: Spain March CPI
· 10:00 p.m.: ECB’s Lagarde speaks
· 10:10 p.m.: BOE’s Broadbent speaks
· 11:00 a.m.: Euro-Area March economic and consumer confidence
· 11:00 a.m.: Italy Feb. PPI
· 2:00 p.m.: Germany March CPI
· 2:15 p.m.: US March ADP employment change
· 2:30 p.m.: US 4Q GDP, personal consumption, PCE
· 3:15 p.m.: Fed’s Barkin speaks
· 4:15 p.m.: ECB’s Panetta speaks on digital euro
· 6:00 p.m.: Russia Feb. unemployment rate, retail sales
· 7:00 p.m.: Fed’s George speaks
· UK PM Boris Johnson appears before Liaison Committee
Corporate Events
· Earnings include Paychex, BioNTech, UiPath, Dollarama, AerCap, Sixt, ICBC, AgBank, PSBC, CNOOC
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.