September 6, 2022

“Labor Day in the US and quiet data schedule contributed to the weakening of the dollar which handed back some of its recent gains in the early morning trade. Meanwhile, sterling holds a firmer tone as Liz Truss, new UK prime minister, plans to freeze energy bills to tackle energy crisis.”

Sam Cornford, Partner – Head of Trading

Main Headlines

A federal judge has granted former President Donald Trump’s request to appoint a “special master” to review materials that the FBI seized from Mar-a-Lago last month. The decision, from Trump-appointed District Judge Aileen Cannon, is a significant victory for the former President, who has railed against the Biden administration and Justice Department since the search was executed four weeks ago. Cannon ordered that a third-party attorney, from outside the government, be brought in to review the materials that were taken from Trump’s home and resort in Florida.

Liz Truss will enter Downing Street on Tuesday after a bruising battle to become the UK’s next prime minister and will finalise a two-year package of energy relief for households and business that could cost up to £100bn. The foreign secretary beat rival and former chancellor Rishi Sunak in a ballot of Conservative party members by 81,326 votes to 60,399, a 57-43 margin, after a seven-week contest to succeed Boris Johnson. Truss will meet the Queen on Tuesday at Balmoral, the monarch’s estate in Scotland, and will immediately return to London to announce her cabinet and address the economic crisis facing the country.

GBP

Sterling is well bid against most major currencies overnight. A Bank of England rate setter said that fast and forceful tightening of monetary policy is needed to stop people’s expectations of inflation drifting up in a way that would force policymakers to keep interest rates higher for longer. Citigroup is close to signing a €100mn deal to develop a new office site in Dublin in a significant boost to the scale of its European headquarters as banks beef up their presence across the EU following Brexit. More than £1bn of taxpayer-funded loans made under the UK government’s Covid “bounce back” scheme have been identified as potentially fraudulent.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. Germany will keep two nuclear plants open this winter, after it became clear gas supply will come up short due to Russia’s decision not to resume Nord Stream flows. Olaf Scholz and Emmanuel Macron agreed to help each other ahead of EU talks this week, with Macron pledging to ship gas to Germany if necessary. The UN nuclear watchdog is due to issue a report on the Zaporizhzhia nuclear power station in Ukraine today, after shelling cut its electricity supplies for the second time in two weeks and raised fears of a catastrophe.

USD

The dollar is weaker than most major currencies in the early morning trade. Myanmar exiles ousted in a 2021 coup are pressing the Federal Reserve to endorse their bid to use $1 billion in funds frozen by the US to back a digital currency and a plan to establish a new central bank. Flood watches were in effect in the US southeast and much of the northeast on Monday as forecasters warned of the possibility of torrential downpours on Labor Day across already saturated ground. Among the hardest-hit areas in this weekend’s storms was northwest Georgia, where 12 inches of rain fell in some spots.

Markets

An Asian stock gauge struggled for traction this morning and US equity futures made modest gains as tightening monetary policy and Europe’s energy crunch continued to weigh on investor sentiment. Both S&P 500 and Nasdaq 100 contracts were up less than 0.5%, while European futures retreated. Asia’s bourses were mixed, rising in China but down in Hong Kong. Treasuries dipped, led by shorter maturities, taking the two-year yield to 3.46%. An oil rally sparked by an OPEC+ output cut cooled on demand risks from China’s Covid lockdowns. A dollar gauge was in sight of a record high. The pound rebounded as traders assessed the agenda of incoming UK Prime Minister Liz Truss, who plans to alleviate energy bills in a policy that may cost £130 billion over 18 months.

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

6:30 a.m.: Netherlands Aug. CPI
8:00 a.m.: Germany July factory orders
8:00 a.m.: Finland July trade balance
9:30 a.m.: Germany Aug. S&P Global construction PMI
10:30 a.m.: UK Aug. S&P Global construction PMI
11:00 a.m.: UK to sell bonds
11:00 a.m.: Hungary to sell bills
11:30 a.m.: Belgium to sell bills

Corporate Events

Earnings include Ashtead Group

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