Morning Report

July 1, 2022

“The Swiss Franc built further on its shares of the global FX reserve basket during the first quarter and in a period that has been overwhelmed by extreme market volatility – over last week, it gained 0.05% against the dollar last week, beating all major currencies.”

Tim Hallinan – Trading Director

Main Headlines

Some of the world’s largest high-frequency traders, funds and cryptocurrency advocates are pushing back against reforms to the $23tn US Treasury bond market that they say will hit the wrong targets and curb trading. Citadel, Two Sigma, Virtu Financial and T Rowe Price are among those sounding the alarm on the sweeping scope of the rules proposed by the US Securities and Exchange Commission. The standards are intended to cover the high-speed traders and hedge funds that are crucial participants in one of the world’s most important markets, because it sets the borrowing costs for securities worldwide. Gary Gensler, chair of the SEC, has made improving the market’s resilience to shocks a priority.

Downing Street has maintained its refusal to order an economic impact assessment of Brexit, as the European Commission claimed that the damage caused by the UK’s exit from the EU was becoming evident. Yesterday, Maros Sefcovic, commission vice-president, said it was now becoming possible to disentangle the effects of Brexit from those of the Covid-19 pandemic and the damage to trade was “starting to show more clearly”. He said trade in services and goods in 2021 from the UK to the EU was down sharply compared with 2019 levels, as new border controls were introduced. The tariff-free Trade and Cooperation Agreement between the EU and UK took provisional effect in January 2021, but Sefcovic said trade between the two sides now involved more paperwork and checks.


Sterling is weaker than most major currencies in the early morning trade. Barclays has given 35,000 of its branch and junior support staff in the UK a £1,200 pay rise to help them cope with the escalating cost of living crisis and soaring inflation. The salary increase will come into effect on August 1 and brings forward part of the lender’s annual pay review, normally due to come into force in March. Boris Johnson yesterday pledged to increase UK military spending to 2.5 per cent of gross domestic product by the end of the decade as part of a strengthening of NATO defences in response to the threat from Russia. London City airport has set out plans for significant expansion, including allowing more weekend flights, as it becomes the latest UK facility to react to the travel industry’s recovery after the coronavirus pandemic.


Euro is stronger against sterling and weaker against the dollar this morning. European leaders must hold firm in the face of economic pain if they want to stop Vladimir Putin’s “war of exhaustion” in Ukraine, according to the head of the country’s state-run energy company. Meanwhile, President Vladimir Putin signed a decree yesterday to take charge of the Sakhalin-2 gas and oil project in Russia’s far east, a move that could force Shell and Japan’s Mitsui and Mitsubishi to abandon their investments as the economic tit-for-tat over Ukraine deepens. Turkey has banned access to two international public broadcasters, striking a blow to freedom of expression in the country and risking renewed tensions with the west.


The dollar is well bid against most major currencies overnight.  Joe Biden has declared that the US and NATO allies will stick with Ukraine “as long as it takes” at the end of a two-day summit that saw the military alliance promise hundreds of thousands more troops to defend eastern Europe. Meanwhile, Joe Biden mistakenly said Switzerland would be joining NATO instead of Sweden in his latest gaffe during the transatlantic alliance’s summit in Madrid yesterday. As Fourth of July travel chaos looms, experts are warning that a combination of factors including pilot shortages, the climate crisis and even the rise of drones means the situation is unlikely to get better soon.


Another bout of risk aversion rippled across global markets Friday, sending stocks and US equity futures lower and bolstering bonds in an ominous start to the second half of 2022. In a pattern of moves evincing concerns about an economic downturn amid tighter monetary policy, European stocks and US contracts dropped almost 1%, with similar declines in Asia. The 10-year US Treasury yield slid below 3% to the lowest since early June. Oil, copper, and zinc were among commodities in the red. The dollar and yen, traditional havens, climbed, while commodity-linked currencies sank. Softer-than-expected US consumer spending and inflation data have bolstered the view that sharp Federal Reserve interest-rate hikes will spark a recession. That backdrop is providing little respite for equities after the worst first half for Wall Street since 1970.

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

8:30 a.m.: Sweden June Swedebank PMIs
8:45 a.m.: France May budget balance
9:00 a.m.: Netherlands June S&P Global/Nevi Mfg PMI
9:15 a.m.: Spain June S&P Global Mfg PMI
9:50 a.m.: France June S&P Global Mfg PMI
9:55 a.m.: Germany June S&P Global/BME Mfg PMI
10:00 a.m.: Euro-area June S&P Global Mfg PMI
10:30 a.m.: UK May consumer credit, mortgage approvals, money supply
10:30 a.m.: UK June S&P Global/CIPS Mfg PMI
11:00 a.m.: Euro-area June CPI
11:00 a.m.: Italy June CPI
12:00 p.m.: UK to sell bonds
6:00 p.m.: Russia 1Q GDP


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