FX Weekly Insights — 08/11/21
Key Events
Monday
15:30 (US) – Fed’s Chair Powell speech
17:00 (UK) – BoE’s Governor Bailey speech
Tuesday
14:00 (US) – Fed’s Chair Powell speech
16:00 (UK) – BoE’s Governor Bailey Speech
22:45 (UK) – BoC’s Governor Macklem speech
Wednesday
13:30 (US) – CPI ex food & energy (YoY)(Oct) 4%/4%
(UK) – M&S half-year profits
Thursday
(US) – Veterans Day
00:30 (AU) – Unemployment rate s.a. (Oct) 4.7%/ 4.6%
07:00 (UK) – GDP (QoQ) (Q3) flash /5.1% (consensus)
(UK) – Burberry half-year profits
Friday
Tentative (US) – Treasury Currency Report
Further Points:
-Will the US consumer price growth reach the highest level since 1990?
-How much did UK economic growth slow in the third quarter?
-Treasury Currency report-who is in and who is out?
-Will supply shortages squeeze British retail earnings?
RUB on the Ground
- Russia is back after long local holidays and also the lockdown in most regions is nearly over.
-Global risk rally on Friday affected RUB as well (with an extremely limited liquidity) and helped to return USD/RUB to 71 handle.
-USD/RUB at 70.00 should hold due to the following:
Ministry of Finance increasing their daily FX operations from $210 mio a day to $360 mio a day which was totally unexpected by the market. And despite this is of course in line with the budget rule, this could be a signal that the officials are not happy with " a too strong RUB".
Tensions in east Ukraine are rising again with more Russian troops near the Ukraine border (CNN reports).
There is a chance we should see some downward pressure on oil prices pretty soon as the US is not comfortable with the prices at such a high level.
Biden and ‘Infrastructure Week’ - A Renewed Boost to his Presidency?
On Friday night, the 1.2$ trillion bipartisan infrastructure bill was passed by Congress, delivering on a foundational pillar of Biden’s agenda after months of deliberation and division among Democrats. Biden has seen his credibility drastically decline since August due to the US’s retreat from Afghanistan, while rising inflation has also applied pressure and fuelled further popular discontent. However, the success of this bill has boosted the credibility of Biden’s presidency. The bill was also approved alongside further good news regarding the pandemic and the economy. The job report for October stated that the unemployment rate fell to 4.6%, and that 500,000 new jobs had been created. Pfizer also announced that its new antiviral pill successfully reduced Covid-19 hospitalisation rates. Together, these three events should participate in rebooting the US’s economy post-pandemic. With major investments in roads, railways, ports and broadband, the bill will also hopefully ease the US’ inflationary pressures and reduce supply bottlenecks. This bill presents an important win for the Biden administration in the run-up for the next congressional elections in 2022. It also creates positive momentum for tackling the next bill, the $1.75tn “Build Back Better” bill. President Biden is hoping to have it passed before Thanksgiving, however it is failing to garner consensus within certain Democrat circles who require further negotiations to establish the details of the bill. Broadly, it contains a package of social programs, new tax policies on high income earners, and $550bn of climate incentives, the largest amount dedicated to climate initiatives in US history.
Chart of the Week - GBP/USD
Resistance: 1.3578
Support: 1.3413