Morning Report

July 7, 2021

“The dollar remains strong ahead of the release of minutes from the Federal Reserve’s latest meeting, which could contain clues on policy makers’ thinking on the interest rates and stimulus outlook. The euro has been knocked back by Germany’s latest data, which showed that investor sentiment fell significantly in July and that orders for German-made goods posted their sharpest slump in May since the first lockdown in 2020. The OPEC crisis continues to pressure risk-sensitive currecies.”

Sam Cornford, Partner & Head of Trading

Main Headlines

The US Department of Defense has made a U-turn on a 10-year, $10 billion cloud-computing contract which was awarded to Microsoft in 2019, cancelling it only two years in. A legal battle with Big Tech competitor Amazon, has led the Pentagon to indicate it now plans to contract with both Amazon and Microsoft to deliver JEDI, the Joint Enterprise Defense Infrastructure platform. between the two instead. This will be reworked and retitled as the Joint Warfighter Cloud Capability. Multiple vendors will be tendered for five years and will be worth billions. Microsoft’s share price remained unmoved as the market closed, whilst Amazon’s gained 4.7%.

An industry body, UK hospitality, has warned of disruption to the UK economy because of easing of Covid-19 restrictions from July 19th to August 16th. Business and health chiefs from across government, NHS trusts, industry bodies and private companies have warned of workplace chaos as 2mn people per week are estimated to be at risk of contracting Covid-19 or being asked to isolate. Health Secretary Sajid Javid admitted that lifting restrictions could lead to 100,000 daily cases by July 19th. UK hospitality estimates that for every positive case, 2 people are asked to self-isolate meaning that over a week, 1.4mn people in the workforce could be affected.


Sterling is lower against the dollar and unchanged against the euro overnight. The Office for Budget Responsibility announced that funding the government’s transition to net zero in 2050 would cost less over the next 30 years than has been spent on tackling the pandemic in the last 2 years. The Home Office is being urged to extend its new Hong Kong visa scheme to include targets of the Beijing regime. A report by MPs on the Home Affairs Committee said a loophole meant many 18 to 23-year-olds who participated in pro-democracy demonstrations cannot apply for the right to come to Britain. Some 36,000 Hong Kongers have already applied for the special visas.


The euro is weaker versus the dollar and unchanged against the pound in the early morning trade. Spain has delayed a minimum-wage increase, one of the most contentious issues on the government agenda, despite being one of the lowest in Western Europe at €1,100 a month. Minimum wage rates in Germany, Belgium and France are closer to €1,500 per month. Ursula Von der Leyen will address the European Parliament ahead of a debate, tackling Hungary’s attempts to siphon €7bn of EU funds from the EU’s €800bn ‘Next Generation Package’ for its economy recovery, as well as resisting Viktor Orban’s anti-LGBT laws.


The dollar is stronger against most major currencies overnight. President Biden continues to urge US citizens to get vaccinated as the Delta variant of Covid-19 begins to sweep across the country. Infections from the Delta strain contributed to a 10% rise in daily Covid-19 cases to around 12,600 late last month, the Centers for Disease Control and Prevention announced. Eric Adams, currently borough president of Brooklyn has been picked as the democratic candidate for the New York mayoral race. Adams, a former police captain promises to be tough on crime. Adams as winner of the party primary is all but certain to become mayor in the heavily Democratic city.


Most Asian stocks fell Wednesday and Treasuries held an advance on concerns about the economic recovery from the pandemic, virus variants and China’s scrutiny of the technology sector. Japan led regional shares lower amid a climb in the yen. Chinese tech firms retreated in Hong Kong as Beijing’s cybersecurity probe of ride-hailing giant Didi Global Inc., and vow to tighten oversight of data security and overseas listings, hurt sentiment. U.S. contracts fluctuated after the S&P 500 dipped and the Nasdaq 100 reached a record. European futures edged up. Ten-year U.S. Treasury yields hit February lows overnight amid slower-than-expected service-sector growth, with short covering exacerbating the move. Oil steadied after dropping toward $73 a barrel in the fallout from the OPEC+ crisis, which has stymied efforts to raise production and buffeted prices.

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

8:00 a.m.: Germany May industrial production
8:45 a.m.: France May trade
10:00 a.m.: Italy May retail sales
11:00 a.m.: European Commission publishes summer economic forecasts
11:00 a.m.: U.K. sells linkers
11:30 a.m.: Germany sells bonds
6:00 p.m.: Russia June CPI
8:00 p.m.: FOMC minutes
EIA short-term energy outlook

Corporate Events

Allen & Co. Sun Valley Conference

To learn more about Ballinger & Co., please visit our website or our LinkedIn and Twitter pages.