Morning Brew December 20 2021
Senior Relationship Manager
Summary: Build Back Better stalling - Risk Off
US Politics are back in the spotlight as Senator Joe Manchin released a statement accusing his party of pushing for an increase in the debt load that would "drastically hinder" the ability of the country to respond to the coronavirus pandemic and geopolitical threats and stated he would not vote for Joe Biden`s “Build Back Better” this is a significant blow not only to Biden`s political agenda but also to his standing.
In combinations with rising corona fears and restrictions, this weighs on Equities and indexes are down more than 1% across the board. On Friday stocks had already closed lower.
10 year yields lost to 1.3650 and the USD Index rises to 96.60, EURUSD hovers around the 1.1250 GBPUSD at 1.3220.
Turkish President Erdogan stated yesterday that Islam would demand lower – not higher – ratees and pushes the Lira even lower to 17.40 against the USD.
Gold and Silver give up some ground to 1802 and 22.35 and Bitcoin falls 46300.
According to JPMorgan, global bond demand could be reduced by as much as 2 trillion USD due to less purchases by central banks, driving yields higher.
Energy prices keep rising in Europe with the short terms rates above €300 per MW/h and Switzerland as well as France close to 400.
China lowered the lending Benchmark rate by 5 basis points to support the economy.
For today, the economic agenda is void of key events, tomorrows we are expecting the GFK from Germany, the US current account, Canadian retail sales and the EU consumer confidence.
Rather than Economic releases, I expect news around Omicron and US Politics to drive risk sentiment the next few days.
Please bear in mind hat we often see extraordinary financing rates in the FX rollovers over the new year. If you want to be on the safe side, consider forwards or swapping your positions into January.