Morning Report
August 09, 2024
“A data vacuum today means that nervous markets are likely to fill the void with bets on next week’s critical releases. Yesterday’s jobless claims data was a fresh reminder of how sensitive FX is to the smallest of surprises this month.”
Tim Hallinan – Trading Director
Main Headlines
Donald Trump and Kamala Harris have agreed to their first presidential debate on 10th September on ABC. Harris posted on social media to say that Trump had ‘finally committed’ to the debate, and Trump meanwhile announced that he wanted two more debates in September.
Barclays has become the first UK-based bank to scrap the EU cap on bonuses, with senior bankers now able to earn 10x their base salary, up from the two-to-one rule imposed by the EU ten years ago. This follows similar moves by Goldman Sachs and JPMorgan in recent years.
GBP
Markets appear to be done with the post-BoE sterling selloff, and the pound finally managed to take advantage of the rebound in risk appetite yesterday. It rose 0.5% even as the dollar benefitted from some stronger jobless claims data. The data diary is empty today, but there is a lot to look forward to next week, when the focus will be squarely on whether services inflation can begin to cool further and how quickly the BoE can proceed with cutting rates towards the end of the year. Claimant count change, wage growth, CPI, GDP, and retail sales data will give a good read on the evolution of the UK economy in July.
EUR
The euro has somewhat flattened off over the past few days, as markets remain hesitant to trade it higher despite gains in the EUR:USD rate spread. It slipped nearly 0.5% after US unemployment claims yesterday but has since recovered the majority of these losses. The data schedule is light again today and the euro’s direction will largely depend on how traders position themselves ahead of some big US data releases next week. German CPI this morning was confirmed at 2.6% this morning.
USD
The dollar’s brief surge yesterday was the epitome of the jittery and erratic market mood we have seen this week. Unemployment claims is a high-frequency and high-volatility release – it’s the medium-term trend that are genuinely informative, rather than single data points. And yet a lower-than-expected 233K print versus the 241K consensus has been enough, alongside the ISM services print earlier in the week, to dispel much of the recession and labour market concern and unwind equity losses. Today, the only top-tier data comes from its northern neighbour, where Canadian employment change is expected to rebound from last month’s negative print. But next week’s CPI data is crucial for Fed expectations and the dollar. Markets still expect the equivalent of four 25bps rate cuts across the final three meetings this year, and any renewed concern that inflation is not sustainable on the way down could see the dollar both catch a safe haven bid and rise on fewer cut bets.
Markets
Further receding recession fears and the reintroduction of risk-taking swung the momentum in equities firmly upward yesterday. The S&P 500 had its best day since November 2022 to rise 2.3% and unwind nearly all of the manic selloff from Monday. The tech-heavy Nasdaq also surged almost 3%.
Main Economic Events (All Times CET)
3:30am: China CPI & PPI Inflation
8:00am: German Final CPI Inflation
2:30pm: Canadian Employment Change & Unemployment Rate
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