June 7, 2024

“The dollar hovered close to an eight-week low on Friday ahead of a crucial US jobs report that could provide clues on the timing of Federal Reserve interest rate cuts.”

Sam Cornford – Head of Trading

Main Headlines

The US Dollar is having a tough time staying resilient against its rivals on the last trading day of the week, with the USD Index staying near the multi-week low it set at around 104.00 earlier in the week. Forecasts suggest the US Unemployment Rate will hold steady at 3.9% in May, while Nonfarm Payrolls are expected to increase by 185,000 following April’s weaker-than-expected rise of 175,000. Annual wage inflation, indicated by the change in Average Hourly Earnings, is anticipated to remain at 3.9%.

In the United Kingdom, the Pound Sterling will be guided by the Employment data for the February-April period, which will be published on Tuesday. The country’s number of employed people has declined for three consecutive times. Indication of more layoffs would hurt the Pound Sterling as it may boost traders’ bets for early rate cuts by the Bank of England.

GBP

Sterling is well bid against most major currencies this morning. British house prices dipped by 0.1% in May compared to April, signalling market stabilisation after last year’s slowdown and subsequent recovery driven by anticipated declines in borrowing costs. Sir Keir Starmer is poised to unveil a government mortgage guarantee scheme aimed at assisting 80,000 individuals in climbing onto the housing ladder, as both Labour and the Conservatives vie for the support of middle Britain. Meanwhile, Jeremy Hunt is set to pledge tax cuts for 700,000 families, averaging £1,500 annually, by doubling the salary threshold at which child benefit begins to be phased out to £120,000.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. The ECB announced on Thursday a 25 basis points reduction in key rates during the June policy meeting, aligning with market expectations. In the post-meeting press conference, ECB President Christine Lagarde avoided confirming further near-term easing, emphasizing a data-dependent approach to future policy decisions. Eurostat is set to release revisions to first-quarter Employment Change and Gross Domestic Product data. Meanwhile, Germany’s Destatis reported earlier in the day that Industrial Production declined 0.1% on a monthly basis in April.

USD

The dollar is weaker than most major currencies in the early morning trade. Despite receiving support from BlackRock and Citadel Securities, a new Texas stock exchange’s attempt to challenge New York’s dominance in the US equity markets has been met with scepticism from rivals, traders, and investor advocates. TXSE, the organisation behind the proposed Texas Stock Exchange, announced this week its intention to seek approval from the US Securities and Exchange Commission to establish itself as a new centre for listed companies and the $8.6 trillion exchange-traded funds industry.

Markets

European stock futures were steady following a lackluster session in Asia as market players awaited a key US jobs reading that’s likely to guide the Federal Reserve’s policy outlook. The Euro Stoxx 50 contract was little changed as equities in South Korea and Australia rose, while those in Japan, Hong Kong and mainland China dropped. Futures for US stocks rose slightly ahead of monthly payrolls data. The dollar was steady, while Treasury yields edged higher.

Main Economic Events (All Times CET)

9:00 a.m.: Switzerland May Foreign Currency Reserves
9:00 a.m.: ECB’s Nagel, Simkus speak
10:00 a.m.: ECB’s Holzmann, Schnabel speak
11:00 a.m.: Euro-area 1Q F GDP
12:00 p.m.: ECB’s Centeno speaks
12:30 p.m.: Russia Rate Decision
2:00 p.m.: Mexico May CPI
2:00 p.m.: Chile May CPI
2:30 p.m.: US May Nonfarm Payrolls
2:30 p.m.: Canada May Unemployment Rate
4:15 p.m.: ECB’s Lagarde speaks
6:00 p.m.: Fed’s Cook speaks

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