The externalities of assistance

Today’s news headlines:

‘Dine-out scheme helped drive sharp fall in UK inflation’. Lower taxes and discounted meals resulting from the government's Eat Out to Help Out scheme has dramatically reduced inflation, which adds pressure on the Bank of England this month. That said, the Monetary Policy Committee is likely to look through this temporary source of deflation and focus on longer-term employment as a guide to its policy action. (Financial Times)

‘Chancellor hints at further measures to prevent UK job losses’. Chancellor of the Exchequer Rishi Sunak has hinted that there may be additional help for the people worst impacted by Covid—the self-employed and part-time workers. While he hasn’t provided any detail yet, several measures—like cutting National Insurance Contributions, which would benefit a broader class of labour—have been discounted already. (Financial Times)

Today's events, rates, and data 

• Yesterday, EU economic sentiment data surprised to the upside, while US data came in mixed. Manufacturing data showed a strong gain and Industrial Production fell off more than anticipated. Again, very little movement in yesterday’s session. While Sterling gained at the expense of the Euro—which is hovering at the top of its trade-weighted range—the move was due to risk-on, with US equities and oil both gaining. The Federal Open Market Committee and its monetary policy announcement is the focus for this evening, where we might learn more about the Republican proposal to hobble the Fed’s asset purchase firepower.

Today's events

UK  CPI y/y: 0.2% vs 1.0% last month
UK  Core CPI y/y: 0.9% vs 1.8% last month
UK  RPI y/y: 0.5% vs 1.6% last month
UK  HPI y/y: 9:30 AM
CA  CPI m/m: 1:30 PM
US  Retail Sales: 1:30 PM
US  Crude Oil Inventories: 3:30 PM
US  FOMC statement: 7:00 PM
US  FOMC press conference: 7:30 PM

Interbank rates:

GBP/USD – 1.2880
GBP/EUR – 1.0860
EUR/USD – 1.1855
USD/CAD – 1.3175