Eye of the storm?
US markets were spooked with news of its first Omicron case although some of those losses have been reversed. There were no major changes in Powell’s testimony yesterday, repeated that risks of higher inflation have increased and that it is appropriate to consider faster tapering. Feds Mester added that a faster taper would give Fed room for a couple of rate rises in 2022 if needed, although Feds Williams was more cautious, saying the Fed has a lot of data to digest ahead of the December meeting.
The US dollar remains towards the upper end of recent ranges, a I type EURUSD is 1.1315 and GBPUSD at 1.3285, EURGBP at 0.8515 (GBPEUR 1.1745). The fact that Powell kept with his hawkish line means the US dollar is likely to remain supported, perhaps more volatile over US data releases. Tomorrows nonfarms will be a good test. Citibank are thinking we could be in the eye of the storm as we await news on both Omicron and Fed hawkishness.
Aussie trade balance came out slightly above expectations. Both imports and exports fell, the latter by less than had been anticipated. AUD is a few points lower this morning against USD and NZD at 0.7110 and 1.0425 respectively.
USDTRY shifted sharply lower yesterday after CBRT intervened in the currency markets. USDTRY was above 13.80 before CBRT took action which saw USDTRY down to 12.35, it has clawed its way back up again to 13.45. The Turkish Finance Minister has left his post and is replaced with one apparently more to Erdogans liking who is willing to cut interest rates despite inflation running at around 20%.
There seems little doubt that Omicron is highly transmissible, with cases emerging in more countries including the US. What is less clear is quite how severe the strain can be and how well vaccines can deal with it. Modernas President has said an Omicron booster could be available as early as March. EU’s von der Leyen is calling for a discussion on mandatory vaccinations, I think Merkel has put forward a similar idea for Germany. UK orders a total of 114 million more vaccines from Moderna and Pfizer. I’m not sure if AstraZeneca are seeing more orders mind you although I did see that scientists have found the reason for blood clotting is some people after having the vaccine. Whether this means they can fix it is another matter.
EU and US are discussing China today and we are likely to see some headlines as a result of that. I’d imagine they will say something on Taiwan, plus there is some suggestion the two blocs will come up with an alternative to Chinas Belts and Road program.
OPEC are also meeting today. Both WTI and Brent are well below the highs seen recently, Brent is at $70 (Nov high $85.50) while WTI is at $66.50 (Nov high almost $85.00). OPEC could well act to push those prices higher again by deferring their planned production increases although Omicron concerns are likely to stem rallies to a degree.
I awoke this morning to a layering of snow. Not enough to go sledging on mind you so less exciting than it first sounds, but I hadn’t even seen any forecast. Does all look a bit chilly mind you. Finally, thought I’d mention the England womens football team. I know I’m a few days behind but just thought it was worth highlighting their 20-0 victory over Latvia. I watched the goals and have to say there were some crackers in there but lets be honest, such a mismatch in farcical and really shouldn’t be allowed at any level, let alone international level.
- 10.00 EU unemployment, PPI
- 13.30 US initial jobless claims
- 14.00 ECBs Panetta speaks
- 01.45 China caixin services PMI