1 July 2021

“The dollar continues to hover around multi-month highs, with today’s private payroll data exceeding expectations, setting out the backdrop of further market confidence in tomorrow’s nonfarm payrolls report. Other major currencies have experienced jitters as fears about the Delta variant creep into decision-making.”

Sam Cornford, Partner & Head of Trading

Main Headlines 

Labour market conditions in the US are improving as the numbers of those re-entering employment continues to rise. Private payrolls growth increased at a fast rate for the second month in a row in June, growing by 692,000, well above most estimations. Hirings in hospitality accounted for 332,000, with restaurants, bars and hotels spearheading the recovery. Education and health services also indicated strong gains, increasing by 123,000, while trade, transportation and utilities rose by 62,000 and professional and business services saw 53,000 hires.

The UK is poised to secure an exemption from new global rules on taxing multinationals for financial services firms. The talks at the OECD in Paris provided a carve out for UK financial services, meaning that the City of London’s largest banks and companies will not pay more tax on their profits. This will be seen as an achievement for Chancellor Rishi Sunak, maintaining the City’s competitive edge for financial service, however, it may come at the cost of reducing the digital services tax for US tech companies in the UK. The G7 countries continue to try to raise global minimum corporation tax to a rate of at least 15%.

GBP

Sterling is weaker against most major currencies this morning. Nissan has announced a £1bn investment for a large-scale battery factory as part of an investment in the UK’s electric car industry. This secures jobs for Nissan’s workers in Sunderland ahead of the UK’s ban on petrol and diesel sales from 2030. The UK introduced emergency legislation to protect domestic steel producers from a rising trend of cheap steel imports into the UK, a hole in the government’s post-Brexit trade strategy. Liz Truss was forced to accept plans for emergency legislation following pressure from lobbying groups and business secretary, Kwasi Kwarteng.

EUR

The euro is stronger against the pound and weaker against the dollar in early morning trade. Slovenia is due to take over the rotating presidency of the European Council for the second time since its accession to the bloc in 2004. The European Commission will approve Ljubljana’s national economic recovery plan whilst making the EU presidency announcement today. Ahead of its launch in two weeks, early details of the EU’s green deal were released today, spearheaded by commissioner, Frans Timmermans. The deal to drive carbon emissions to net zero by 2050 has been described as a “moonshot” by commentators in Brussels.

USD

The dollar is well bid against most majors overnight. Senior Democrats in the House of Representatives have attacked a package of regulations brought by the House Antitrust Committee to regulate US big tech companies. The US and Japan have been conducting military exercises aimed to protect Taiwan, following increased activity by the People’s Liberation Army near Taiwan and the Senkaku Islands.

Markets

U.S. and European equity futures rose Thursday and the dollar firmed as traders looked ahead to a key payrolls report and digested a dip in Asian stocks on signs Covid-19 flareups are hampering regional manufacturing. S&P 500 and Euro Stoxx 50 contracts edged up after the U.S. gauge completed one of the best first halves since 1998 for American shares. In Asia, most major equity markets posted modest losses, though China eked out a gain. Purchasing managers’ indexes suggested curbs imposed to fight the virus had sapped output in parts of the Asian region. Oil climbed ahead of a meeting between OPEC+ producers on output policy and as a stalemate in Iranian nuclear talks drags on.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Germany May Retail Sales
9:00 a.m.: ECB’s Lagarde speaks
9:00 a.m.: Turkey June Manufacturing PMI
9:15 a.m.: Spain June Manufacturing PMI
9:30 a.m.: Riksbank Rate Decision
9:45 a.m.: Italy June Manufacturing PMI
9:50 a.m.: France June Manufacturing PMI
10:00 a.m.: Euro-Area June Manufacturing PMI
10:00 a.m.: Italy May Unemployment
10:00 a.m.: ECB’s de Cos speaks
10:00 a.m.: BOE’s Bailey speaks
10:30 a.m.: U.K. June Manufacturing PMI
10:30 a.m.: Spain sells linkers, bonds
10:50 a.m.: France sells bonds
11:00 a.m.: U.K. sells bonds
11:00 a.m.: Euro-Area May Unemployment
2:30 p.m.: U.S. Initial Jobless Claims
3:45 p.m.: U.S. June Manufacturing PMI
OPEC+ meeting on output

Corporate Events

GM, Stellantis report U.S. auto sales
Earnings include H&M

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