Out of control

Today’s news headlines:

‘Britain faces £40bn a year tax rises to stop debt spiralling’. The British government will need to increase taxes by more than £40bn a year by 2025 to avoid public debt rocketing out of control, according to the Institute of Fiscal Studies. UK borrowing is set to reach £350bn this year, equivalent to 17% of GDP, the highest level in peacetime in more than three centuries. The dire long-term outlook for public finances rests on the UK’s poor economic prospects as by the end of the year, UK output is likely to remain 7-10% lower than pre-pandemic levels. (Financial Times)

‘BoE asks banks how ready they are for negative rates’. The Bank of England is taking the first tentative steps in preparing banks for the prospect of negative interest rates to support the economy. The BoE wrote to banks yesterday asking about their readiness to deal with a zero or negative rate. BoE Governor Andrew Bailey has previously stated that rates are not to go lower in the near future. Still, with the benchmark rate standing at 0.1%, the central bank wants to avoid any operational disruption that could arise from negative rates. (Financial Times)

Today's events, rates, and data 

• Yesterday, Sterling moved above the 1.30 level against the Dollar despite new lockdown measures on parts of the UK and a lack of positive Brexit news flow. Overnight, the Dollar regained some ground, while a tech rally meant US stocks climbed to an almost six-week high.

Today's events

UK BRC Retail Sales Monitor: 6.1% vs 4.7% previously
UK Claimant Count Change: 28.1k vs 39.5k previously
UK Unemployment Rate: 4.5% vs 4.1% previously
UK Average Earnings Index: 0.0% vs -1.0% previously
Eurozone ZEW Economic Sentiment: 10.00am
German ZEW Economic Sentiment: 10.00am
US CPI: 1.30pm
US Core CPI: 1.30pm

Interbank rates:

GBP/USD: 1.3035
GBP/EUR: 1.1060
EUR/USD: 1.1785
USD/CAD: 1.3125