Covid cases up but can they stay out of hospital?
US and Asian stocks made something of a recovery yesterday although not managing to erase all of the recent losses. Concerns about the rapid spread of the Delta variant still seem to be holding back any serious recovery, we really have to wait to see if vaccinations are able to break the link between number of Covid cases and number of hospitalisations.
Despite the gloriously sunny weather I feel a bit of a sense of doom and gloom, i suppose the increased Covid numbers don’t help but I have said before, everything feels good when GBP goes up and feels worse when it goes down for some reason. On the positive side, my wife, now two weeks out of hospital, continues to make good progress. Over the past few weeks I know many more people, young and middle-aged, who have tested positive and have actually been reasonably ill, but have fortunately not required hospital treatment. A good sign perhaps?
Talk that UK is looking to amend the Irish Sea border checks, going against the Brexit agreement and possibly putting the NI protocol at risk has done little to help an already struggling GBP. A report suggesting Spain will put guards along the Gibraltar border also highlights the difficulties the EU and UK face although in fairness that border area has always had its up and downs. GBPUSD down at 1.3600, EURGBP up at 0.8645 (GBPEUR 1.1565).
Aussie retail sales disappointed and a Reuters poll suggests Aussie Q3 GDP could come in well below expectations if the Sydney lockdown persists. AUDUSD is down at 0.7300, lowest level since Nov 2020 as the market begins to think RBA will use the latest weak data to present a dovish message at its meeting in early August.
Meanwhile US 10 year yields are down at 1.20%, over half a percent lower than the March peak. While those higher yields in March brought some concerns that the market was looking for central bank tightening, the worry now is the market could be looking at a considerably worse growth outlook, no tightening and if anything the need for more monetary easing.
A light calendar today may give the chance some further consolidation but for the medium term we need to see signs that we can cope with the inevitable increase in Covid cases.
- 13.30 CAD new house prices
- 02.30 AUS NAB business confidence