The rally train appears to be slowing down, with Boris Johnson’s plans to raise NI rates building on the theme of monetary tightening seen in recent months. Tomorrow sees the ECB come back into play, with Lagarde likely to cut asset purchases. 

  • European markets tumble, with rising US Delta cases unlikely to reverse tightening trajectory. 

  • ECB comes into focus, with Lagarde expected to trim the asset purchase scheme.  

  • UK tax hike highlights need to cut the huge pandemic deficit. 

Another day of losses look to be on the cards if early European price action is any guide, with widespread losses bringing the DAX into a one-month low. UK plans to raise taxes, coupled with a gradual transition towards tighter monetary policy serve to highlight how the focus is likely to shift towards withdrawing and paying for stimulus rather than implementing new support measures. The theme of monetary withdrawal comes up once again tomorrow, with the ECB providing yet another opportunity to highlight how the current direction of travel is being driven by the hawks. As such, it comes as no surprise to see caution ahead of an ECB meeting that could see Lagarde & co trim their bond buying programme. While Friday’s US non-farm payrolls figure did raise hopes of a potential delay to tapering, the recent rise in US 10-year yields highlight how markets see rates rising before long.  

This week has seen Boris Johnson provide a timely reminder that the seemingly one-way traffic of increased spending and financial support was always likely to ultimately result in higher taxes as the Treasury seek to cut the deficit built up over the year. Despite a manifesto vow to avoid raising any major tax rate, the pandemic has arguably provided an acceptable platform to raise funds via the 1.25% National Insurance hike proposed by the government. Today sees parliament vote on the proposition, and while there has been some Tory opposition, it looks likely the £12 billion boost to the NHS coffers will be pushed through. Investors and business owners are also taking an additional hit, with plans to apply a 1.25% tax on dividend payments from April 2022.  

Ahead of the open we expect the Dow Jones to open 120 points lower, at 34,980. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD gains traction and climbs above 1.1600 after US data

After dropping below 1.1600 earlier in the day, EUR/USD managed to stage a recovery in the early American session toward 1.1620 with the latest data releases from the US making it difficult for the greenback to find demand. US trade deficit expanded in September and durable goods orders contracted. 

EUR/USD News

GBP/USD stays in the negative territory around mid-1.3700s

GBP/USD recovered modestly from the weekly low it set at 1.3710 earlier in the day but continues to trade in the negative territory around 1.3750. The dollar is staying on the back foot after the latest data releases but the cautious mood is limiting the pair's upside.

GBP/USD News

XAU/USD needs to crack $1781 for further downside

Gold price extends losses amid resurgent US dollar demand. Market sentiment sours ahead of the critical US macro data. Falling US Treasury yields could help put a floor under gold price.

Gold News

Shiba Inu price to provide buy opportunity before SHIB doubles again

Shiba Inu price is due for a retracement after rallying 113% in less than three days. The MRI displays a major sell signal, hinting at a correction that could extend 17%.

Read more

Bank of Canada Rate Decision: Inflation prospects headline policy review Premium

The Bank of Canada is expected to continue tapering its asset purchases and maintain its current rate posture when it concludes it meeting on Wednesday at 10:00 am EDT. Overnight rate projected to be unchanged at 0.25%.

Read more

Majors

Cryptocurrencies

Signatures