Good morning
A day of consolidation in the markets, in other words it wasn’t very exciting. Which makes writing up any meaningful commentary tricky once again. As we get nearer to Powells Jackson Hole speech it seems many are now thinking we won’t get any signal of tapering. If Powell avoids the topic altogether we should see USD weaken, but the risk is any mention of possible tapering could see USD make further gains. GBPUSD remains around 1.3725, EURGBP 0.8560 (GBPEUR 1.1680) and EURUSD 1.1745. Buying short dated downside options in EURUSD or GBPUSD could be a decent way to hedge against any surprise from Powell. 31 August 1.3650 GBPUSD put costs 20 usd pips or $2,000 per £1mio notional, or 15 pips buys a 1.1700 EURUSD put ($1,500 per EUR1mio notional).
I ventured up to the City yesterday. The number of people on the tube with no masks was much greater than I have previously seen, however the people I met there said that commuters were generally wearing masks while some tourists or leisure visitors were more likely to be the ones not wearing them.
Some slightly worrying news in the press which suggests Covid vaccines lose quite a lot of effectiveness after a few months. Pfizer sees protection after two jabs fall from 88% to 74% after six months or so, while AstraZeneca drops to 67% after around five months. It’s a bit alarming given many people will be hitting that six months mark soon. There was talk of boosters but I’ve not seen much on that recently. This news comes as FT reports Covid-19 deaths in the UK had risen 10% in early August, 174 people died yesterday from Covid which is the highest since March 12th. I’m still expecting cases numbers to spike after the recent removal of restrictions, its impossible to have thousands of people travelling to a football stadium or festival without some rise in infection rates.
Speaking of festivals, my eldest is off to the Reading festival today. He’s not a seasoned camper so it will be interesting to see how he copes. When I see him pack what I would regard as fairly luxury items it is very difficult to stop myself from turning into an old man who says ‘in my day all we had was a canvas tent and a blanket….’ or the like. Really, kids of today, they don’t know how easy they have it. The key worry is whether he has enough chargers for his phone to last several days. First world issues.
- 09.00 German IFO
- 09.30 ECBs de Guindos speaks
- 13.30 US durable goods
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