September 6, 2021

“The US markets are closed today, but globally the dollar is recovering from Friday’s losses on the worst US labour report since January. The greenback has been particularly sensitive to jobs since the Fed has made a labour market recovery a condition for paring back the pandemic-era asset purchases. The euro has paused the recent gains after market participants priced in the expectations that the ECB will be more hawkish on tapering stimulus when it meets on Thursday.”

​​​​​Sam Cornford, Partner and Head of Trading

Main Headlines

Amid concerns that Biden’s $3.5tn social spending plan will be stymied by rising internal divisions among Democrats, a senior White House adviser expressed confidence that a key Democratic senator who raised objections to the package can be persuaded. Senator Joe Manchin, who last week demanded a “strategic pause” in Biden’s economic agenda, should be “very persuadable” by the argument that the package “adds nothing to the debt,” White House chief of staff Ron Klain said. The West Virginia senator wrote in an op-ed on Thursday that rising inflation and a soaring national debt require a go-slow approach and a “significantly” smaller plan than the one Democratic leaders have endorsed.

Boris Johnson returns to Parliament this week facing a backlash from members of his party amid reports he is planning a manifesto-breaking tax hike on British workers to boost funding for social care. Current and former Tory ministers are warning that the PM risks losing voters if he goes ahead with a £10 billion increase in national insurance, something the 2019 Conservative manifesto pledged not to do. Along with an announcement on social care, Johnson and Chancellor Sunak are this week also expected to confirm the ditching of a “triple lock” pledge to increase pensions by the highest of inflation, wages or 2.5%.

GBP

Sterling is weaker versus the dollar and stronger versus the euro this morning. Boris Johnson will seek to defend Britain’s role in the chaotic western withdrawal from Afghanistan when he addresses the House of Commons on Monday. Meanwhile, Labour supply problems affecting UK industries from construction and manufacturing to retail and hospitality could last for up to two years, CBI has warned. Its members predicted the worker shortages would not be helped by the end of the government’s job retention scheme this month, and there would be no quick fix given the time needed to train skilled staff.

EUR

The euro is weaker against most major currencies overnight. German factory orders unexpectedly rose in July, driven by a surge in export demand for ships. European Commission president Ursula von der Leyen is likely to strike a bullish tone in her State of the Union speech in Strasbourg on September 15. The commission is predicting 4.8 per cent growth this year following last year’s 6 per cent slump, the €800bn Next Generation EU collective borrowing programme is kicking off and the union is ahead of the US in full vaccination rates. But looming over the speech will be the German election just over a week later — a source of major uncertainty for EU policymaking.

USD 

The dollar is higher against most majors in the early morning trade. Leaders of some of the busiest US ports expect congestion snarling maritime gateways to continue deep into next year, as the crush of goods from manufacturers and retailers looking to replenish depleted inventories pushes past shipping’s usual seasonal lulls. Meanwhile, the recent spread of the Delta variant has thrown back-to-school plans into disarray, temporarily driving tens of thousands of students back to virtual learning or pausing instruction altogether – with cases rising most in states where schools opened earliest.

Markets

MSCI Inc.’s Asia-Pacific gauge climbed for a seventh session, the longest streak since January. Japan closed up more than 1% to a 31-year high on hopes of better pandemic management and more spending by Prime Minister Yoshihide Suga’s successor. U.S. and European equity futures advanced. The S&P 500 was little changed Friday, the Nasdaq 100 edged up to a record and Treasury yields rose as investors digested disappointing U.S. payroll growth and faster-than-projected wage increases. US markets are closed Monday for the Labour Day holiday and there is no Treasuries cash trading. Aluminium hit the highest in over a decade as political unrest in Guinea fueled concerns over supply of the raw material needed to make the metal. Australia’s dollar slid as rising virus cases stoke questions about whether the central bank will delay a plan to taper bond purchases.

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

8:00 a.m.: Germany July factory orders
9:30 a.m.: Germany August Markit construction PMI
10:00 a.m.: U.K. August new car registrations
10:00 a.m.: Switzerland total sight deposits average for week September 3
10:30 a.m.: Euro-area September Sentix investor confidence
11:30 a.m.: Germany to sell bills
11:30 a.m.: Netherlands to sell bills
2:50 p.m.: France to sell bills
U.S. Labor Day holiday

Corporate Events

Earnings include Broadcom, Docusign, Coca-Cola Europacific Partners, Barratt Developments, Melrose Industries, Osram

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