A sting in the tail

Today’s news headlines:

‘Sunak set to follow VAT stimulus with autumn tax rises’. The Treasury is considering near-term cuts to the rate of VAT for certain industries as an additional measure to kick-start the economy. The lower VAT rate for sectors like tourism will only come into force when the government decides to halve 2m social distancing down to 1m and will come at a significant cost to the exchequer. In order to stabilise public borrowing, the Chancellor is eyeing up tax rises and cuts to spending in his Autumn budget. (Financial Times)

‘A truly ugly transatlantic trade war is looming’. Following last week’s developments, where the US walked out of multilateral talks to agree on a global digital tax framework, the story of deteriorating trade relationships will once again rear its ugly head. Issues that could bring on another trade war include Germany’s gas pipeline deal with Russia, the EU’s protectionism of its car industry, the digital taxing of large US tech firms, and the US Government stance on tariffs. (Financial Times)

Today's events, rates, and data 

• Global stocks have begun the week in the red after a resurgence in coronavirus infections in parts of Europe, China, and the US. Oil prices also pulled back after a solid week which saw Brent Crude settle around the $42/barrel level. FX markets are still caught between concerns over the second-wave of the coronavirus outbreak and a recovery in global economic conditions. 

UK CBI Industrial Order Expectations: 11.00am
EUR Consumer Confidence: 3.00pm
BoC Governor Tiff Macklem speaks: 4.00pm

Interbank rates:

GBP/USD: 1.2380
GBP/EUR: 1.1065
EUR/USD: 1.1190
USD/CAD: 1.3592