PM in isolation as UK restrictions end
Markets are nervous as a result of the ongoing spread of Delta variant, plus US/China tensions. Risk sentiment was dealt a further blow on Friday as the US Michigan survey showed inflation expectations shifting higher which once again get s the markets talking about potential Fed policy changes sooner rather than later. US retail sales were also released Friday, on the face of it the numbers were strong but a revision lower in the previous month means the net result was pretty standard. US equities traded lower and that has been followed through into Asia with many indices posting losses over 1%. US dollar was pushed higher accordingly. What I do not understand is how the US 10 year yield is below 1.3%.
GBP faced losses, GBPUSD traded lower partly on USD strength but its really more general GBP weakness that is having an impact, and this morning we see further GBP selling taking GBPUSD down to 1.3715 as I type. GBP also weaker against Euro, EURGBP trading up from last weeks lows just around 0.8500 (GBPEUR 1.1765) to reach almost 0.8600 (1.1630) this morning.
The move lower in GBP comes as all Covid restrictions are lifted across the UK today. While this has been on the cards for a while now it is strange that we are opening up just as Covid cases reach quite alarming numbers again, over 50,000 new cases each day. Not only that but more and more people are being ‘pinged’ on their Covid App to tell them to isolate. 500,000 people were told to isolate in the first week of July. This raises the question of whether we really can, and should, be opening up. The entire Metropolitan tube line went down at the weekend as the control room staff were ‘pinged’. I see this morning the line is still facing severe delays. So whether it is staff on a train line, staff in a shop, restaurant, bar or factory, one wonders how long it will be before business find running difficult because of a shortage of staff. Even UK PM Johnson and Chancellor Sunak are forced to isolate after Sajid Javid tested positive.
There are schemes being piloted that try to replace the need for isolation with Covid tests, Johnson and Sunak both tried to claim they were on this scheme to avoid isolation, but a backlash saw them u-turn. Still, Johnson is at Chequers, I guess there are worse places to isolate than a mansion in the Chilterns. Even so, there is some irony that our Prime Minister is in isolation on the day restrictions are being lifted in the country.
Hospital admissions are up to 530 each day in England, compared to 3,800 back in January. Whitty has said hospital admission numbers could become scary quite quickly. The next couple of months will be critical to see whether the vaccinations work in reducing serious illness and hospitalisations. Schools are closed for holidays which should stop the spread among that age group but nightclubs etc reopening must surely lead to an increase in cases there. How serious it is remains to be seen. Am I the only one who sees another lockdown coming at the end of the summer?
- 10.00 EU construction output
- 11.00 BoEs Haskel speaks
- 00.30 Japan CPI
- 02.30 PBoC rate announcement
- 02.30 RBA minutes