The inevitable

Today's news headlines: 

‘Sunak plans corporate tax increase to bolster public finances’. Filling the UK budget deficit will be no small feat and will undoubtedly require tightening of the belt in a number of areas. Chancellor of the Exchequer, Rishi Sunak, has proposed raising the corporate tax rate from 19% to 23%, and potentially more. Both policy wonks and conservative ministers have commented that a modest rise is probably unavoidable, but a larger increase would impact Britain’s competitiveness in a post-Brexit time. US Treasury Secretary, Janet Yellen, has also proposed an increase in US corporate taxes from 21 to 28% which helps take some of the sting out of a modest move from the UK Exchequer. (Financial Times)

‘BoE governor warns EU over derivatives clearing power grab’. The tension between the EU and UK over financial regulation is increasing. Bank of England Governor, Andrew Bailey, has already criticised the EU earlier this month over their refusal to grant the UK equivalency, which would allow EU business to remain in London.  Today, Bailey has made that criticism more pointed, particularly around the €83tn of Euro derivatives trading which currently resides in London and is seemingly being forced back onto the European continent. Bailey commented that about a quarter of that business is likely to be lost when equivalency expires in mid-2022 if another agreement is not reached in the interim. (Financial Times)

Today's events, rates, and data 

  • Sterling’s week-long rally seemed to top out yesterday, as we reached fresh highs against USD and EUR. Overnight, the Pound came off around 1% and it remains to be seen whether this was just a pause or signals a top. Numerous US data points and Fed speakers could provide some ammunition for a move on the Dollar today, particularly following Fed Chair, Jay Powell’s, move to a neutral stance on US fiscal stimulus.

Today's events

NZ ANZ Business Confidence: 7.0 vs 11.8 last month
AU Private Capital Expenditure: 3.0% vs -3.1% last month
EU German GfK Consumer Climate: -12.9 vs -15.5 last month
US Prelim GDP q/q: 1:30pm
US Durable Goods Orders m/m: 1:30pm
US Unemployment Claims: 1:30pm
US FOMC Member Bostic Speaks: 1:30pm           
US Pending Homes Sales: 3:00pm
US FOMC Member Quarles Speaks: 4:10pm
US FOMC Member Bostic Speaks: 5:00pm

Interbank rates

GBP/USD: 1.4135
GBP/EUR: 1.1580
EUR/USD: 1.2200
USD/CAD: 1.2500