2 July 2021

“The greenback continues to climb ahead of Friday’s monthly payrolls report in the United States, offering room for The Fed’s fiscal stimulus to start dropping off. Only really strong US jobs growth data will allow the dollar to remain on this positive trajectory in the coming weeks. Any climb for Sterling has been anchored by BoE Governor Andrew Bailey’s insistence that high inflation will prove transitory.”

Sam Cornford, Partner & Head of Trading

Main Headlines

There is room for cautious optimism in US labour markets following nonfarm payrolls rising by 720,000 in June, in what will be the strongest report on employment since March 2021. It is rumoured that the number of US citizens finding jobs this month reached 800,000, many of whom have moved across sectors with the unemployment rate falling to 5.6%. On the same theme, the number of jobless claims in the country dropped below 400,000 for the first time since the start of the Covid-19 pandemic, representing progress for workers.

In the UK, job vacancies have returned to pre-pandemic levels as the economic recovery continues across the country. Active job adverts totalled over 1.55mn with 192,000 new jobs being advertised last week alone. Demand for workers in the UK labour market has grown stronger than before the first lockdown in March 2020 according to the Recruitment and Employment Confederation. Demand from the hospitality sector has eased in the UK, following strong jobs growth in April and May, however, many more roles have been made available in the education sector and in market research roles.

GBP

Sterling is weaker against the dollar and stronger against the euro this morning. The Labour party won the Batley and Spen by-election by a narrow margin of 323 votes in what represents a long overdue win for the party and for Keir Starmer. Elsewhere, the U.K. vowed to protect British consumers against the costs of phasing out greenhouse gas emissions after the Times said ministers have drawn up carbon-cutting plans that would raise the price of heating homes and running cars. Boris Johnson is due to lobby German chancellor Angela Merkel to reopen Europe for travel, during farewell talks hosted at Chequers today.

EUR

The euro is weaker against other major currencies in early morning trade. The World Health Organisation stated that Covid-19 infections have risen by 10% across Europe in the past week due to sluggish vaccine rollouts, increased social mixing at Euro 2020 matches, and the emergence of the Delta variant. Slovenia’s EU presidency had a tough start with European Commission President Ursula von der Leyen launching a public criticism of Prime Minister Janez Jansa for his government’s approach to media freedom and the rule of law.

USD

The dollar is stronger against most majors overnight. The Justice Department in the United States has placed a moratorium on capital punishment until the department reviews the use of the death penalty. Elsewhere, The Trump organisation and its chief financial officer, Allen Weisselberg, have been charged with criminal fraud by Cyrus Vance. The Manhattan district attorney brought the case in tandem with New York state attorney general Letitia James. It is alleged that Weisselberg netted $1.76mn in “indirect compensation” which paid his rent on a Manhattan apartment, as well as misreporting his income, earning tax refunds up to $94,902 and $38,222 in state refunds.

Markets

A slide in Chinese equities and the regional spread of the delta Covid-19 variant weighed on Asia’s stock market Friday, restraining sentiment despite positive vaccine developments and a record U.S. close. Oil climbed. China’s CSI 300 index tumbled following Thursday’s centennial celebrations for the Communist Party. Investors viewed the event as increasing market risks. Shares rose in Japan and Australia. S&P 500 contracts were stable after the U.S. index posted its longest winning streak since February, helped by cyclical sectors like energy. Nasdaq 100 futures retreated. Crude traded above $75 a barrel, around the highest since 2018, after the OPEC+ alliance descended into infighting, casting doubt on an agreement that could ease a surge in prices.

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

9:00 a.m.: Spain Jun unemployment
9:00 a.m.: ECB’s de Cos speaks
11:00 a.m.: Euro-Area May PPI
12:00 p.m.: U.K. sells bills
2:30 p.m.: ECB’s Lagarde speaks
2:30 p.m.: U.S. June jobs report
6:00 p.m.: Russia 1Q GDP
7:00 p.m.: Baker Hughes U.S. rig count