Friday 4 June, 2021

“The robust economic data prompted the biggest dollar gains in nearly a month, fuelling concerns about a pullback in central bank stimulus. Non-farm payrolls data, expected later today, is what investors are looking out for: if they beat expectations, concerns about economic overheating in the US could resurface in the markets.”

Sam Cornford, Senior FX Dealer

MAIN HEADLINES

Joe Biden pitched the idea of a 15% minimum tax on U.S. corporations to Senate Republicans, signaling flexibility, as his efforts to fund a bipartisan infrastructure package continued. The US President indicated that a narrower infrastructure package could be agreed, setting aside the administration’s earlier plan to raise the headline corporate income rate to 28% from 21% and reducing planned new spending from $1.7 trillion to $1 trillion.   infrastructure proposal to Republicans. Mr. Biden also suggested repurposing $75 billion in previously approved Covid-19 relief aid.

UK companies hired permanent staff at the fastest pace for 23 years in May, according to a widely watched survey, adding to signs that the economy is bouncing back more strongly than economists expected. The easing of Covid-19 restrictions in Britain and reopening of more sectors of the economy boosted the KPMG and Recruitment & Employment Confederation permanent placement index to 67.4, a sharp increase on the 50 recorded in April. With the number of people furloughed also falling by a third between January and the end of April, demand for permanent workers climbed across all categories, led by IT and the hotel and catering sectors.

GBP

The pound is higher against the euro and lower against the dollar overnight. Workers are using subway services in the City of London at the greatest scale since the beginning of the Covid-19 crisis, in the latest sign that rising vaccination rates and easing lockdowns are getting people back to the office. Elsewhere, the UK is on the cusp of signing a trade deal with Norway and other members of the European Economic Area, with a formal announcement expected as soon as Friday. Commuters to 15 stations in and around London’s main business district recorded 258,481 taps on May 20.

EUR

The euro is weaker against most majors this morning. After months of negotiations, Brussels and the UK have reached a deal on fishing rights for species spread between the two sides’ waters, in a sign of progress in bilateral relations ahead of broader Brexit talks next week. According to a survey of economists by Bloomberg, the European Central Bank will extend its phase of faster bond-buying through the summer to ensure the economic rebound after coronavirus lockdowns morphs into a sustained recovery.

USD

The dollar is well bid in the early morning trade. Markets are bracing for U.S. nonfarm payrolls for May, with consensus estimates pointing to a gain of 674,000 after April’s disappointing 266,000. Yesterday afternoon’s data release from payrolls processor ADP showed the private sector created jobs in May at the fastest pace in nearly a year, driven by strong gains in leisure and hospitality. The Department of Labor also reported that new filings for unemployment benefits in the US fell below 400,000 for the first time since the start of the pandemic

MARKETS

Asian stocks and U.S. contracts held steady Friday after Japanese shares fluctuated while China and Australia posted modest increases. European futures were little changed. The U.S. gauges fell overnight but came off lows on signs President Joe Biden may be willing to compromise on corporate taxes. Treasury yields steadied from a climb. China’s markets weathered Biden’s order amending a ban on U.S. investment in Chinese companies. The rally in crude oil paused. Meme stocks including AMC Entertainment Holdings Inc. had another volatile U.S. session. Bitcoin fell after a cryptic Elon Musk tweet hinting at a split with the token.

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

9:30 a.m.: Germany May construction PMI

10:00 a.m.: U.K. May new car registrations

10:30 a.m.: U.K. May construction PMI

11:00 a.m.: Euro-Area April retail sales

12:00 p.m.: U.K. sells bills

1:00 p.m.: ECB’s Villeroy speaks at climate conference

2:30 p.m.: U.S. May jobs report

6:00 p.m.: Russia April retail sales

7:00 p.m.: Baker Hughes U.S. rig count

Russia, Turkey sovereign debt rated by Moody’s; Italy rated by Fitch, Germany rated by DBRS

G-7 finance ministers meeting in London

Fed’s Powell takes part in a Green Swan panel with ECB’s Lagarde and Villeroy

Vladimir Putin delivers address at St. Petersburg International Economic Forum

Bitcoin 2021

 

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