Turning over a new leaf

Today’s news headlines:

‘Overhaul of UK capital gains tax urged in review’. A Capital Gains Tax review, undertaken at the behest of Rishi Sunak, has recommended reducing annual allowance and raising rates in line with income tax. If enacted, the controversial move would raise billions of pounds for the Exchequer, but punish those who hold second homes and assets held outside tax-efficient wrappers, like ISA’s. The Chancellor is likely to tread very carefully however as this measure would squarely hit a key Tory demographic. (Financial Times)

‘Key Johnson aide quits in Downing St power struggle’. Lee Cain, the Prime Ministers Communications Director, resigned yesterday over access to Boris Johnson. Johnson’s right-hand man Dominic Cummings is also said to be in talks about his future, but insiders expect him to stay in situ. Keir Starmer, Labour opposition leader, hit smartly on both the PM’s poor performance and deteriorating alliances. Starmer stated “On the day the UK became the first country in Europe to report 50,000 coronavirus deaths and the public endured another day of lockdown, Boris Johnson’s government is fighting like rats in a sack over who gets what job”. (Financial Times)

Today's events, rates, and data 

  • As today’s session begins, we are seeing the Dollar continue a timid rebound off post-election lows and Sterling being sold more sharply, as the vaccine-induced equity rotation shifts away from tech and safety takes a breather. The devolving situation at Number 10 is weighing particularly heavy on Sterling, as Brexit negotiations continue to take a new turn. Michel Barnier is linking €6 billion of natural gas and energy trading to the fishing rights issue, in order to get the UK closer to a middle ground. We are watching the trio of central bankers speaking at 4:45pm today, since that signals a more coordinated dovish attitude towards monetary policy.

Today's events

UK RICS House Price Balance: 68% vs 62% last month
JP Tertiary Industry Activity m/m: 1.8% vs 0.8% last month
UK Prelim GDP q/q: 15.5% vs -19.8% last quarter
UK GDP m/m: 1.1% vs 2.2% last month
UK Index of Services 3m/3m: 14.2% vs 6.9% last month
UK Industrial Production m/m: 0.5% vs 0.3% last month
UK Manufacturing Production m/m: 0.2% vs 0.9% last month
UK Prelim Business Investment q/q: 8.8% vs -26.5% last quarter
EU Industrial Production m/m: 10:00am
US CPI m/m: 1:30pm
EU ECB President Lagarde speaking: 4:45pm
UK BoE Governor Bailey speaking: 4:45pm
US Fed Chair Powell speaking: 4:45pm

Interbank rates:

GBP/USD: 1.3185
GBP/EUR: 1.1190
EUR/USD: 1.1785
USD/CAD: 1.3090

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