Friday 30 July, 2021

“The greenback withered near a one-month low this morning and was poised for its worst weekly performance since May as dovish remarks by the Federal Reserve together with underwhelming economic data took the steam out of a month-long rally. The Fed’s caution is seen due to a slowdown in U.S. growth, easing in inflation and worries about the Delta variant.”

Sam Cornford, Partner & Head of Trading

Main Headlines

President Biden announced a series of new measures to combat the spread of the Delta Covid variant, including a call for states to offer $100 incentives for jabs and instructions for federal workers to show proof of vaccination or to wear masks. One of Biden’s biggest moves on Thursday was to force federal workers to choose between getting vaccinated and wearing masks. “Anyone who does not attest to being fully vaccinated will be required to wear a mask on the job no matter their geographic location, physically distance from all other employees and visitors, comply with a weekly or twice weekly screening testing requirement, and be subject to restrictions on official travel,” the White House said. The requirement will apply to federal government employees and on-site contractors.

More than half a million people came off furlough in June as the reopening of hospitality drove a rebound in UK economic activity, but separate data on household borrowing pointed to the pace of the recovery slowing as the Delta variant spread. Figures published by HMRC yesterday showed that the number of jobs supported by wage subsidies fell from 2.4m to 1.9m between late May and late June — a drop of 590,000 — with more than half of those still furloughed working some of their normal hours. The improvement was driven by the gradual reopening of the hospitality sector which accounted for more than half the total fall, while younger people were among the main beneficiaries.

GBP

The pound is weaker than most majors this morning. The UK government admitted that only 13% of the 2,000 testing sites for key workers excluded from Covid self-isolation rules were operational, as the number of people “pinged” in the latest seven-day period by the NHS Covid-19 app in England and Wales hit a new record. According to the latest NHS data, 689,313 alerts were sent between July 15 and July 21 informing users that they had been in “close contact” with an individual infected with coronavirus, an increase from the 618,903 alerts sent in the week to July 14. The new figures will intensify pressure on the government to increase the provision of testing sites for essential workers, who were excluded from the 10-day quarantine guidance last week over concerns the “pingdemic” was creating staff shortages in key areas including transport and food distribution.

EUR

The euro is higher than the pound but lower than the dollar in the early morning trade. France has been forced to delay the restructuring of state-owned utility EDF after it failed to agree the terms with the EU, a setback to a major economic reform promised by President Macron. “Significant progress has been made in our discussions with the European Commission, but to date we have not reached an overall agreement,” said a government official. “Therefore it is not possible to submit a draft law to parliament if the principle points of the reform have not been agreed to in advance.” Dubbed Project Hercules, the planned overhaul of EDF was meant to give it the financial firepower to invest in both nuclear and renewable energy in the coming decades.

USD

The dollar is well bid against most majors overnight. The US’s economic growth rose slightly in the second quarter to 6.5% on an annualised basis, a weaker-than-expected increase as strong consumption was partially offset by lagging property investments and inventory drawdowns. The data from the US commerce department yesterday fell short of economists’ forecasts of 8.5% growth on an annualised basis, and compared with a 6.3% increase during the first quarter. It nonetheless brought US output back above its pre-pandemic level for the first time since Covid-19 struck, and economists expect strong growth for the rest of the year.

Markets

U.S. equity futures and Asian stocks slid Friday as traders weighed signs of a slowdown ahead for megacap technology companies and risks from China’s regulatory crackdown. Treasuries and the dollar rose. Stocks fell in Hong Kong and China as well as Japan. Nasdaq 100 contracts shed more than 1% as Amazon.com Inc. tumbled in extended trading on indications its rapid growth through the pandemic is waning. Asia-Pacific stocks had jumped Thursday after Beijing tried to allay fears over regulatory curbs on private industries, but U.S.-listed Chinese equities later resumed declines. S&P 500 futures also fell. The gauge rose overnight on data signaling scope for the Federal Reserve to keep policy ultra-loose. U.S. economic growth was solid while trailing estimates. Jobless claims dropped but were higher than forecast. Gold was at $1,828.05 an ounce.

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

8:45 a.m.: France July CPI
9:00 a.m.: Spain 2Q GDP
9:00 a.m.: Austria 2Q GDP
9:00 a.m.: Italy June unemployment rate
10:00 a.m.: Germany 2Q GDP
10:00 a.m.: Norway July unemployment rate
10:00 a.m.: Italy 2Q GDP
11:00 a.m.: Italy July CPI
11:00 a.m.: Euro-area June unemployment rate
11:00 a.m.: Euro-area July CPI
11:00 a.m.: Euro-area 2Q GDP
12:00 p.m.: U.K. to sell bills
2:30 p.m.: U.S. June PCE deflator
7:00 p.m.: Baker Hughes U.S. Rig Count
Germany Sovereign Debt to be rated by Moody’s

Corporate Events

Earnings include Hermes, Linde, AbbVie, P&G, Nomura, Eni, Chevron, Exxon

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