Morning Report

July 7, 2023

“The main data today is the Non-Farm Employment Change report from the US, forecast at 224K, a far sight under last month’s figure of 339K. The unemployment rate is expected to drop slightly to 3.6%. Additionally, traders will watch comments from BoE and ECB speakers later today, carefully scrutinizing their remarks for potential monetary policy indications.”  

Sam Cornford, Partner – Head of Trading 

Main Headlines 

U.S. Treasury Secretary Janet Yellen held informal talks with China’s central bank governor Yi Gang and former economy tsar Liu He today. The discussions covered global, U.S., and Chinese economies, with the goal of reducing tensions between the two superpowers. Expectations for significant progress are low, as both sides prioritise national security over economic ties. While specific details were not disclosed, the talks were described as meaningful. This meeting builds upon previous discussions in Zurich in January and involves Liu, a trusted associate of Chinese President Xi Jinping, despite his retirement. IN other news, data released by the central bank on Thursday shows Federal Reserve lending to banks decreased in the last week. Lending through the discount window increased slightly from $3.2 billion on June 28 to $3.4 billion on Wednesday. Additionally, “other credit” related to the resolution of failed banks decreased from $168.3 billion on June 28 to $164.8 billion. Bank Term Funding Program lending also saw a minor decline from $103.1 billion on June 28 to $102 billion as of Wednesday. 

Britain announced its intention to establish a new sanctions regime specifically for Iran, enabling the UK to exert greater authority in targeting individuals involved in activities such as weapons proliferation and threats against British citizens. Currently, Britain’s sanctions against Iran primarily address human rights concerns. However, the proposed changes would expand the criteria, allowing the government to designate individuals based on their involvement in undermining democracy, rule of law in the UK, hostile actions against British people or property, or acts affecting Britain’s allies. In other news, the FCA has stated that banks should speed up the increase of interest rates for savers. However, they clarified that it does not have the authority to dictate pricing. There has been mounting pressure from politicians and consumer advocates for British lenders to raise savings rates at a similar pace to mortgage rate hikes, as the rising cost of living disproportionately affects lower-income households.  


Sterling is stronger against the Euro and Dollar this morning. Earlier, the Halifax House Price Index (HPI) report, which tracks the prices of homes financed by them in the previous month, was released. This report serves as a leading indicator of the housing industry’s health, as increasing house prices attract investors and stimulate activity in the sector. The forecast projected a 0.1% increase, but the actual report showed a deviation of 2 basis points (bps) lower at -0.1%. This continues the trend observed in the past two months, although the gap is narrowing. Later today, we will also hear from Catherine Mann, a member of the Bank of England Monetary Policy Committee (MPC), participating in a panel discussion titled “Challenges for Policy After the Return of Inflation: New Directions for Research?” at the Annual Meeting of the Central Bank Research Association in New York. As MPC members vote on setting the nation’s key interest rates, their public engagements often provide subtle hints about future monetary policy, potentially leading to mild volatility during this discussion. 


The Euro is weaker than most major currencies in the early morning trade. Earlier, the German Industrial Production report from Destatis, which measures the inflation-adjusted value of output by manufacturers, mines, and utilities, showed a deviation of 2 basis points (bps) below the forecast, contrasting with more significant deviations observed in previous months. Additionally, we anticipate speeches from two influential figures in European monetary policy: German BUBA President Joachim Nagel, who will address the panel “Central Banks’ Battle Against Inflation: Implications for Monetary Policy,” and ECB President Christine Lagarde, who will speak at the Economic Meetings of Aix-En-Provence in France. 


The Dollar is well bid against most major currencies overnight. Today, the Non-Farm Employment Change report from the US will be closely watched. This report measures the monthly change in employed individuals, excluding the farming sector. Recent data has displayed impressive growth over the past five months, surpassing expectations, and the current forecast stands at 224K, but it is uncertain if this trend will continue for this month’s reporting. Alongside this, the Unemployment rate will be released. It serves as a crucial indicator of economic well-being since consumer spending is closely linked to labour market conditions. In the past five months, the reports have shown slight fluctuations, with two months surpassing the forecast by 2 basis points (bps) and three months falling short by 1-2 bps. Today’s figure is expected to drop slightly to 3.6%. 


Stocks declined as investors waited on another round of US jobs numbers to gauge if they will back new bets for more Federal Reserve rate hikes. Shares in Europe slipped for a third day, dragged lower by utilities and media stocks as the regional benchmark headed for its worst week since the middle of March. US equity futures signalled more of the losses seen Thursday in the S&P 500 and Nasdaq 100 benchmarks after stronger-than-expected private hiring data. Asian stocks slid for a third day. 

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

8.00 a.m.: Germany May Industrial Production
8:00 a.m.: Sweden, Norway May Industrial Production
8:45 a.m.: France May Trade Balance
9:00 a.m.: Swiss June Foreign Reserves
10:00 p.m.: Italy May Retail Sales
10:30 p.m.: ECB’s Guindos speaks
11:00 a.m.: ECB’s Stournaras speaks
11:00 a.m.: Greece June CPI
2:00 p.m.: ECB’s Nagel speaks
2:30 p.m.: US June Jobs Report
4:30 p.m.: BOE’s Mann speaks
6:45 p.m.: ECB’s Lagarde speaks 


To learn more about Ballinger & Co., please visit our website or our LinkedIn page.