• richard evans

Risk sentiment lower as we head into the weekend

Good morning


Schools are breaking up today although my kids are already at home, a spate of positive lateral flow tests across the school was enough for them all to be sent home a couple of days before the end of term. I understand many other schools have taken similar action, making it clear that once lockdowns are over, Covid infection rates soon rise. No doubt the Euros, particularly the final, had a hand in spreading the virus between families and friends. I am looking at the further opening up to begin next week and can only assume that we will see infection rates rise at an alarming rate soon after.


The key remains whether the vaccinations do their job to reduce the number of seriously ill and hospitalisations, and to reduce the number of fatalities. There seem to be growing doubts over the effectiveness of the AstraZeneca vaccine against the Delta variant. Of all the Covid patients in the ward my wife was in, not one had had Pfizer or Moderna, they all had the AZ jab. According to those nurses who discuss such matters with their counterparts in other hospitals, they are all seeing the same thing. Now this is no scientific study, the official numbers still suggest a high level of success, but something to watch out for. A booster jab in September seems quite likely, I’ll be booking in as soon as I can. For now we can just sit and hope, but having seen the effects first-hand of the virus on an otherwise healthy person, I urge you all to continue to remain sensible and safe, It hasn’t gone away.


We heard from two ends of the Fed spectrum, with Bullard, known for his hawkish views, said it is time for emergency measures to end, while Evans said he sees rates on hold through 2023, with the proviso that it wouldn’t take much for him to look at some rise in 2023 and hopes to have a better idea by the end of this year. Meanwhile Yellen said she sees several more months of higher inflation before it begins to ease.


NZD rose overnight as CPI data came in much higher than expected, remember RBNZ talked about more persistent inflation pressures building earlier this week, not really seeing the moves higher as transitory, unlike their BoE or Fed counterparts. NZDUSD however remains just above 0.7000, still below that key 0.7100 area.


US relations with Chine get no better, with US unhappy with China crackdown on democracy in Hong Kong, China meanwhile have refused a meeting with the US Deputy Secretary of State.


So overall with higher inflation, hawkish central bankers, worsening diplomatic relations between China and US, and Covid infection rates well on the rise, it is no surprise that risk sentiment is struggling.


Amid all of this, we have seen some horrendous flooding across Europe which has claimed the lives on nearly 100 people, with hundreds more unaccounted for. With further rain due there today we can only hope the situation does not worsen but it is certainly something of a catastrophe.


US retail sales is the main event today, next Thursday we have the ECB rate meeting, followed by PMIs Friday. Looks like we could be in for some fantastic warm and sunny weather over the weekend, 30 degrees Sunday according to the BBC. Spare a thought for our friends in Europe as we are sunning ourselves.


- 10.00 EU CPI, trade balance

- 13.15 CAD housing starts

- 13.30 US retail sales

- 14.00 Feds Williams speaks

- 15.00 US Michigan sentiment survey

- 20.30 CFTC positon data



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