Good morning
Another day for a stronger dollar yesterday. Powell reiterated his belief that tapering is likely to commence soon but made it very clear that we are still a very long way away from any rate rises. However he did make it clear that in inflation remained too high for too long, the Fed would react. Quite what ‘too high’ and ‘too long’ are we really don’t know. Focus still very much on jobs, the Fed will face a difficult task balancing jobs growth with tackling high inflation. Plenty of Fed officials speak again today, expect a very similar message from them. US 10 year yields are up to 1.55%, well off recent lows but still a long way from the highs seen earlier this year.
BoEs Bailey said yesterday the UK recovery is not even and that pre-pandemic levels are likely to only be reached early next year, a little later than was thought a couple of months ago. Indeed he voiced concern that the recovery could be derailed due to the supply chain crisis. He avoided answering whether BoE would raise rates in Nov, but said that interest rates were BoEs main tool, rather than QE. The UK furlough scheme ends today, the fear of course is that unemployment numbers will begin to worsen. I wonder whether some of those at risk of losing jobs will retrain as lorry drivers.
GBPUSD has hit its lowest levels for 2021, currently 1.3430, a move of over 300 pips in a couple of days. EURGBP at 0.8640 (GBPEUR 1.1575), while EURUSD has traded below 1.1600 for the first time in over a year.
It is the supply chains that seem to be getting a lot of attention, we are seeing the issues with fuel, The Times warns we could face a difficult Christmas with empty shelves, I would not be at all surprised to see panic buying of some foods begin again in the near future. This is not really just a Brexit issue, indeed it is not just a UK issue, but a problem the world seems to be facing. The danger is that supply shortages could lead to higher inflation, which central banks will struggle to deal with.
China is now on holiday for Golden week, possibly good timing given disruptions in their power supply, high coal prices and power cuts have hit production recently.
I am off tomorrow on a golf weekend that has been planned for a very long time having been postponed a couple of times due to Covid restrictions. Rather typical that each of those weekends were nice and sunny, this one however looks set to be pretty wet. I like golf but I have never enjoyed playing in the rain. Fingers crossed its not as bad as they make out, perhaps they are making it seem worse just to prevent people moving around and using petrol. A quick look out of the window suggests that is unlikely to be the case.
Just a quick word on Covid before I leave you. At schools, cases seem to be rising quite quickly. No major surprise there but it has been enough for letters to come home to reinforce the idea that lateral flow tests should be taken twice each week. They do say that people who have had Covid should not take lateral flow tests for 90 days since infection, two of my kids are in that bracket. However just be aware that although the world seems to be returning to normal, Covid is still very much among us. Id di read one article that suggested Covid will eventually turn into something no more serious that a bad cold. Lets hope so. In the meantime, bring on the booster jabs…..
- 09.00 German unemployment
- 10.00 EU CPI, unemployment rate
- 13.00 German CPI, HICP
- 13.30 US GDP, Core PCE, initial jobless claims
- 13.30 CAD GDP
- 14.45 US Chicago PMI
- 15.00 Feds Powell speaks
- 16.00 Feds Bostic speaks
- 17.30 Feds Evans speaks
- 18.05 Feds Bullard speaks
- 20.30 Feds Harker speaks
- 00.30 Japan unemployment, Tankan survey
- 01.30 AUS building permits
- 02.45 China caixin manufacturing PMI
Friday
- 09.00 EU markit manufacturing PMI
- 09.30 UK markit manufacturing PMI
- 13.30 US personal income, spending, PCE
- 14.30 CAD markit manufacturing PMI
- 14.45 US markit manufacturing PMI
- 15.00 US manufacturing ISM, Michigan sentiment survey
- 20.30 CFTC position data
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