September 2, 2022

“Focus is on the US labour market report for August with the expectation of another robust increase of 300K in payrolls. A strong labour market data will add to the likelihood of another 75bps rate hike by the Fed later this month, which could result in a stronger dollar.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Joe Biden warned that American democracy was in grave peril by Republican forces loyal to Donald Trump who “fan the flames” of political violence in pursuit of power at any cost. In a primetime address from Philadelphia, the city where American democracy was born, the US president said the United States was in a continued battle for the “soul of the nation.”

The number of UK households in fuel poverty will more than double in January to at least 12mn unless the next prime minister takes “immediate” action to curb spiralling energy bills, a coalition of groups has warned. About 28mn homes, or 42 per cent of all households, will not be able to afford to adequately heat and power their properties from January, when a typical yearly energy bill is forecasted to exceed £5,300, according to the End Fuel Poverty Coalition.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. An EU official confirmed that Brussels would not engage in further talks as long as Liz Truss’s Northern Ireland Protocol Bill continued its passage through Parliament. The European Union will refuse to negotiate changes to the Brexit deal on Northern Ireland if Liz Truss continues with her controversial legislation that would allow ministers to rip up parts of the agreement.

EUR

Euro is well bid against most major currencies overnight. Europe’s dependence on Russian gas appears to be coming to an end, potentially alleviating the risk of further supply disruptions at a time when many fear Russia could completely cut off deliveries during the winter. It has endured a sharp drop in gas exports from Russia, traditionally its largest energy supplier. Meanwhile, the latest data collected by industry group Gas Infrastructure Europe shows that the EU’s overall storage levels are at an average of over 80% full, while Germany’s underground storage is 84% full ahead of winter.

USD

The dollar is weaker than most major currencies in the early morning trade. US employers likely continued to hire workers at a strong clip in August while steadily raising wages, signs of persistent labour market strength that could encourage the Federal Reserve to deliver a third 75 basis point interest rate hike this month. The Labour Department’s closely watched employment report today would come a week after Fed Chair Jerome Powell warned Americans of a difficult period of slow economic growth and possibly rising unemployment as the US central bank aggressively tightens monetary policy to suppress inflation.

Markets

There was a risk averse mood on markets for much of yesterday. The Euro Stoxx 50 shed 1.7%, while the S&P 500 rebounded late in the US session to finish slightly higher, up 0.3%. Elsewhere, oil prices dropped by a further 4%, moving back to $92 per barrel as reports of lockdowns in China to counteract a wave of Covid-19 exasperated concerns of slower global growth.

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

8:00 a.m.: Germany July trade balance
9:00 a.m.: Spain August unemployment
10:00 a.m.: Norway August unemployment
11:00 a.m. Euro-Area July PPI
12:00 p.m.: Ireland 2Q GDP
2:30 p.m.: US August jobs report
4:00 p.m.: US July factory orders, durable goods orders
7:00 p.m.: Baker Hughes US rig count
UK leadership ballot closes. Winner announced Monday.

Corporate Events

Earnings include BNP Paribas Fortis

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