Monday 7 June, 2021

“Despite the dollar being up this morning, Friday’s modest job figures, steady Fed expectations and a broadening global economic recovery will likely weigh the greenback down. The euro’s price moves are also being restricted by the possibility of tapering in the run up to a European Central Bank meeting on Thursday.”

Sam Cornford, Senior FX Dealer

MAIN HEADLINES

Late on Friday, the US Labor Department revealed that the United States added 559,000 jobs to its labour market in May as the unemployment level fell to 5.8% within the US economy. The non-farm payrolls data was slightly worse than economists’ expectations of about 650,000 employment gains, but marked an improvement over the 278,000 jobs posted in April. The figures were released at a pivotal moment for the US economy, with growth rebounding strongly thanks to the lifting of pandemic restrictions across the country and hefty fiscal stimulus, while triggering a burst of inflation.

The reopening of the U.K. economy in May and June has improved prospects for low-paid workers in the leisure, retail and hospitality industries. A report by the Resolution Foundation, a thinktank focused on improving living standards, urged the government to look beyond increasing the minimum wage, improving job security and labour market regulation to ensure its recovery benefits for low paid workers. The report sheds further light on the fact that low-medium income workers in these sectors were most likely to lose their jobs during the pandemic, yet had the least security and regulation protecting their employment status.

GBP

Sterling is weaker against most major currencies this morning. A rebellion in the Conservative party over spending cuts on U.K. aid is gaining traction. Led by former aid secretary, Andrew Mitchell MP, over 30 Conservative MPs including former prime minister Theresa May have pledged to pass an amendment to the Advanced Research and Innovation Agency Bill (ARIA) which would raise overseas aid spending. Boris Johnson’s government is likely to face repeated opposition in the House of Lords, even if the rebellion led by Andrew Mitchell is unsuccessful in the House of Commons.

USD

The dollar is higher against most majors overnight. Facebook announced that the decision of its oversight board will be upheld and extended, banning Donald Trump from its network for at least two years. This decision is likely to attract criticism from Trump’s Republican allies, who accuse the company of censoring conservative views. Whilst the Department of Defense makes rapid plans for the withdrawal of US troops from Afghanistan, a move that has split opinions across the United States, the CIA is concerned that the move will bring less cross-government collaboration.

EUR

The euro is lower against the dollar and higher against the pound in the early morning trade. Joe Biden heads overseas to Europe this week, heading to the G7 hosted in the U.K. before heading for a multilateral US-EU dialogue in Brussels which aims to strengthen the transatlantic alliance’s resolve and cooperation against Russia and China. Biden’s rhetoric comes at the right time to match the trend of EU-China relations, with the European Parliament freezing an EU-China investment agreement in recent months.

MARKETS

Asian stocks remained steady and U.S. equity futures fell marginally on Monday following Janet Yellen’s comments on higher interest rates and awaited this week’s U.S. inflation report. Shares fluctuated in Japan and dipped in Hong Kong, while S&P 500 and European contracts were in the red. Treasury Secretary Yellen said President Joe Biden should push forward with his spending plans even if they spark inflation that persists into next year, aiming to create a marginally higher interest rate in the US economy. Benchmark US Treasury yields ticked up. The S&P 500 was up at a record level on Friday.

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

8:00 a.m.: Germany April Factory Orders

9:00 a.m.: Spain April Industrial Output

10:30 a.m.: Euro-Area June Sentix Investor Confidence

11:30 a.m.: Germany sells bills

1:00 p.m.: Turkey sells bonds

2:50 p.m.: France sells bills

4:00 p.m.: BOE’s Breeden speaks

6:00 p.m.: Russia May CPI

EU justice ministers meet

International Atomic Energy Agency holds board meeting

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