Friday 6 August, 2021

“In a strong week for the dollar, it reaches a week-high against the euro and yen ahead of US payroll data being confirmed today. Momentum to tighten monetary policy in the US is building, whereas in Europe and Japan this remains a distant plan. Sterling has dipped towards the back end of the week despite the Bank of England’s continued accommodative stance on interest rates.”

Tim Hallinan, Trading Director

Main Headlines

In the United States, economists are forecasting a rise in the nonfarm payrolls report for July, with 858,000 job additions, the most since last August. The latest estimate on the lips of traders points to 897,000 additions, a strong jump which will inject confidence into the economy. Less layoffs in the education sector may contribute to the high net number of additions. As a result, the composition of the July gain across private services, goods and government payrolls will be of more interest than usual. Federal Reserve officials will scour the report as they look for the right time to taper quantitative easing.

The Bank of England has stated that a tighter labour market will hold the keys to trigger a raise in interest rates in the UK. The Monetary Policy Committee had not anticipated to change it’s Covid-19 guidance anytime soon, as the bank remains committed to meet it’s 2% inflation target. Meeting this target is a way off, as inflation hit 2.5% in June and BoE officials hedged that it could rise as high as 4%. The Committee is not ready to raise rates just yet, but economic data suggests tightening may be needed sooner rather than later to sustainably meet the 2% inflation target in the medium term.

GBP

Sterling is lower against most majors overnight. Starting salaries in the UK surged at the fastest pace in at least 24 years as employers try to squeeze more workers out of a shrinking pool of candidates, as the labour market tightens in the UK. The ‘Pingdemic’ has faltered across the country, with the number of alerts sent to Britons falling by 43% with 395,971 alerts sent in the first week of August as compared to 690,129 alerts between July 15 and July 21. Transport Secretary, Grant Shapps has resisted pressure to scrap costly PCR tests arguing that travel has been irreversibly changed due to the pandemic.

EUR

The euro is lower against the dollar and higher against the sterling in early morning trade.  Emmanuel Macron’s stock is up after the French constitutional court approved his policy to introduce vaccine passports, as high vaccination rates allow for the re-emergence of public life. France and Germany will begin offering a third Covid-19 vaccine booster to vulnerable members of their populations, despite calls from the WHO to disregard domestic populations until poorer countries have received substantial quantities of vaccinations. Italian Prime Minister Mario Draghi is facing criticism from his governing coalition over the proposed sales of Monte dei Paschi di Siena, the world’s oldest bank.

USD

The dollar is well-bid against most majors overnight. Moderna has retained its stance that the vaccine is 93% effective against the coronavirus six months after the second dose, as the sale of 199 million mRNA vaccines lifted profits by $4.2bn in the second quarter of 2021. Apple has proposed to install new software on all US iPhones called “neuralMatch”, which scans phones for images of child abuse and reports the user to a team of human reviewers if it believes illegal imagery is detected, who will then contact law enforcement if the material is verified.

Markets

Most Asian stocks dipped Friday as traders weighed the spread of the delta coronavirus strain against a record Wall Street close while awaiting key U.S. payrolls data. Shares fell in China, where Beijing’s regulatory crackdown and a warning about a possible downward spiral at China Evergrande Group the world’s most indebted developer hit sentiment. Alibaba Group Holding Ltd. anticipates that Chinese government tax breaks for the internet industry will start to dwindle, swelling costs. Japan fluctuated, with Nintendo Co. weighing after a profit miss. Crude oil headed for one of its biggest weekly losses this year on demand risks from Covid-19. U.S. contracts were little changed in the wake of fresh peaks for the S&P 500 and Nasdaq 100 on solid earnings. Treasuries retreated.

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

8:00 a.m.: Germany June industrial production

8:45 a.m.: France June trade balance

9:00 a.m.: Switzerland July foreign currency reserves

9:00 a.m.: Spain June industrial production

10:00 a.m.: Italy June industrial production

12:00 p.m.: U.K. to sell bills

2:30 p.m.: U.S. July jobs report

7:00 p.m.: Baker Hughes U.S. rig count

Bank of Italy report on balance-sheet aggregates

Corporate Events

Earnings include London Stock Exchange, Ventas, AP Moller-Maersk, Carl Zeiss, NTT

To learn more about Ballinger & Co., please visit our website or our LinkedIn and Twitter pages.