Morning Report – Thursday 9th July

Main Headlines

Britain’s finance minister promised an additional £30 billion to head off an unemployment crisis on Wednesday, funnelling money to employers, homebuyers and beleaguered hospitality firms to drive a recovery. The UK economy shrank by 25% in March and April and could be heading for its biggest fall in 300 years in 2020, with the unemployment rate on course to more than double to about 10%, according to official projections.

Demand for Hong Kong dollars is intensifying in the face of an heightened geopolitical tension, with mainland buying helping to buoy both the pegged currency and local stock market. The Hong Kong central bank sold a combined HK$15.8 billion ($2 billion) to purchase the U.S. dollar on yesterday, the biggest intervention since it started defending the peg on the strong end of the trading band in late April. The Hong Kong Monetary Authority has now spent almost $12 billion this year to keep the currency from strengthening further.

Stocks in Asia rallied with European futures, spurred by gains for technology companies after the Nasdaq hit another record and as easing Chinese deflation fuelled further gains for the in its equities. The offshore yuan was a standout gainer. U.S. futures edged up with 10-year Treasuries, gold held on to $1,800 an ounce. Oil was a touch lower.

GBP

Sterling has rallied to one month highs, unmoved by Chancellor Rishi Sunak’s announcement of his plans to revive the economy. In an afternoon speech, the British finance minister said the government would pay bonuses to employers to bring workers back to their jobs from the state’s coronavirus emergency furlough scheme. He also said the government would cut value added tax (VAT) on spending at hotels, restaurants and tourist attractions and subsidise temporary discounts on eating out to boost demand for services hardest hit by the COVID-19 lockdown.

EUR

The euro could be boosted further later today as Germany is scheduled to release export data. Economists expect shipments from the euro zone’s largest economy to rebound sharply in May from a large decline in the previous month.

USD

The dollar fell against most currencies overnight as a rally in riskier assets such as global equities and commodities put a dent in safe haven demand for the U.S. currency. Lingering worries about the spread of the coronavirus could keep some currency pairs in a tight range, but the dollar’s losses are gradually increasing as sentiment favours riskier bets on long term economic growth.

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

7:00 a.m.: Germany May trade, current account balance
10:00 a.m.: U.K. to sell 900 million pounds of Linkers
11:00 a.m.: ECB’s Hernandez de Cos speaks
1:30 p.m.: U.S. initial jobless claims