July 6, 2021

“Sterling has made significant advances on the back of Boris Johnson’s promise to end almost all Covid-19 restrictions in a fortnight, recovering from last week’s dip and lending market participants confidence in further economic recovery. Now, investors wait anxiously on the release of minutes from the Fed’s June meeting, due tomorrow, following the bank’s hawkish shift last month.”

Sam Cornford, Partner & Head of Trading

Main Headlines

The Biden administration is urging OPEC+ to compromise over boosting output after the cartel abandoned its meeting without a deal on restoring curtailed production. A disagreement between Saudi Arabia and the UAE over production cuts meant OPEC+ failed to reach a deal, which has prompted fears in the US that higher energy costs could limit the global economic recovery from coronavirus. The White House stated that it is “closely monitoring the OPEC+ negotiations and their impact on the global economic recovery” and that officials are urging proposed production increases to go ahead.

In a news conference yesterday, Prime Minister Boris Johnson announced plans to end almost all Covid restrictions in England from 19 July. While warning that “this pandemic is far from over”, Johnson stated that limits on social contact and mass events, the legal requirement to wear a mask indoors, and government advice to “work from home” will all be lifted. The decision, due to be confirmed on 12 July, is driven by Ministers’ belief that the link between coronavirus cases and hospital admissions has been severely weakened by the UK’s successful vaccination programme. The Education Secretary is expected to provide an announcement on school isolation rules later today and updates relating to international travel and a new test and release system are due later in July.

GBP

Sterling is stronger against other major currencies this morning. Trade union Unite and Mayors from some of England’s largest cities have criticised plans to remove the requirement to wear masks on public transport on 19 July. Elsewhere, Home Secretary Priti Patel is set to publish her Nationality and Borders bill, which will grant the UK’s border forces new powers to arrest asylum seekers landing in the UK illegally and to send migrant boats back to France.

EUR

The euro is stronger against the dollar and weaker against the pound overnight. The European Central Bank has almost completed its largest strategy review in almost twenty years with policymakers meeting this week to determine future monetary policy. The top priorities are agreeing a new inflation target and the central bank’s role in tackling climate change and an announcement could come as early as this week. Elsewhere, German Chancellor Angela Merkel and French President Emmanuel Macron urged China to ease travel restrictions for Europeans as they sought to repair strained relations via a video summit. Germany has also eased its travel ban on UK visitors.

USD

The dollar is weaker against sterling and the euro in the early morning trade. The US General responsible for facilitating the withdrawal of Nato troops from Afghanistan has expressed concern over the speed of the Taliban’s assault and the poor security situation which is being left behind. Meanwhile, officials have indicated that the Biden administration will revamp US sanctions policy, aiming to avoid collateral economic damage, in a significant departure from policy under Trump. The review is expected at the end of the summer.

Markets

Asian stocks were mixed Tuesday and Treasuries weakened as traders weighed a jump in crude oil prices following the collapse of a deal among OPEC+ leaders to boost output next month. The breakdown of talks has sent crude climbing toward $80 a barrel Japanese stocks made modest gains while those in Hong Kong and China slipped. Lingering concerns about China’s cybersecurity crackdown are shadowing the nation’s stock market. One of the most high-profile probes is into ride-hailing giant Didi Global Inc., which only just listed in the U.S. European and S&P 500 equity futures fluctuated and Nasdaq 100 contracts fell. Gold continued its positive July, edging toward a fifth daily gain.

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

8:00 a.m.: Germany May factory orders
9:00 a.m.: Spain May industrial output
9:00 a.m.: ECB’s de Cos speaks
9:30 a.m.: Germany June construction PMI
10:10 a.m.: ECB’s Guindos speaks
10:30 a.m.: U.K. June construction PMI
10:30 a.m.: ECB’s Visco speaks
11:00 a.m.: Germany July ZEW survey
11:00 a.m.: Euro area May retail sales, July ZEW survey

Corporate Events

Earnings include Vulcan Materials, Smart Global

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