GBP

Much of Sterling’s gains last week, following the optimism of a sooner than expected rate hike, have been depleted due to a Brexit-related shortage of truck drivers. Britain is facing a potential drying-up of fuel at petrol stations which has caused a spate of panic-buying. UK PM Boris Johnson and his team are up for taking military support in an attempt to ease the crisis. Despite this, GBP holds above last week’s lows with a more favourable German election result showing an end to power for Angela Merkel’s conservative party. This hints at a power vacuum in the EU bloc, which may in turn allow the UK to benefit.

EUR

Finance minister Olaf Scholz is likely to lead Europe’s largest economy going forwards, after his centre-left SPD came on top in Germany’s elections. The centre-left Social Democrats (SPD) won 25.7% of the vote, ahead of 24.1% for Merkel’s CDU/CSU conservative bloc, according to provisional results. Today, the parties will begin talks on forming a coalition, with the SPD likely to seek an alliance with the Greens (who gained 14.8% of the vote) and the FDP (11.5%). The probable participation of the business-friendly FDP soothes markets fearing substantial regulation. Apart from reactions to the German elections, European Central Bank President Christine Lagarde is set to speak. The ECB is looking to phase out one bond-buying scheme, the PEPP, but ramp up another, the APP.

USD

The Dollar opens relatively unmoved against its peers with Investors feeling comfortable with the Federal Reserve’s upcoming tapering of bond buying announced last week. U.S. yields climbed to their highest since the start of July in anticipation of the aforementioned tighter monetary policy. Meanwhile, the Evergrande saga is still weighing on the USD with worries the developer could default on its $305 billion of debt. However, these concerns were eased slightly earlier today with The People’s Bank of China injecting a net 100 billion yuan ($15.47 billion) into the financial system, following up on the net 320 billion yuan last week. Elsewhere, Durable Goods Orders are released later today which could add some short term support to the Dollar. The reading is expected to climb 0.8% from July’s reading to 0.7%. The final figure shows the state of US production activity so generally speaking, a high reading is bullish for the USD.

Economic Calendar

12:30 pm US Durable Goods Orders (Aug)