Thursday 3 June, 2021

“We can see the dollar wobbling above major support levels this morning after the Fed announced yesterday that it will unwind corporate bond holdings it amassed through an emergency facility last year thereby signalling the end of pandemic measures. The FX space is also in a stasis ahead of the private U.S. payrolls data coming out later today and non-farm payrolls on Friday.”

Sam Cornford, Senior FX Dealer

Main Headlines

The White House said that President Biden will rebuke Vladimir Putin over the cyber attack on JBS, the world’s biggest meat processor, when the two presidents meet later this month, and the US does not rule out retaliating against the perpetrator it suspects is a Russian criminal gang. The company suffered a ransomware attack that forced the closure of much of its North American and Australian operations raising fears about the security of the US’s food supply. Deutsche Bank told its more than 1.5K US investment bank employees that they must be back in the office by early September as part of their return-to-work policy.

The reopening of indoor hospitality in England has failed to boost footfall to retail destinations such as high streets and shopping centres, according to new data. In the four weeks to May 29, visitor numbers across UK retail destinations were 27 per cent below 2019 levels, according to the consultancy Springboard. The German government plans to speed up the expansion of wind and solar energy by 2030 as part of its climate protection programme. This programme envisages funding of around 7.8 billion euros ($9.5 billion) for next year, including 2.5 billion euros for building refurbishment and an extra 1.8 billion euros for subsidies for electric car purchases.

GBP

The pound is weaker than the dollar but stronger than the euro in the early morning trade.  Education leaders have accused the UK government of falling short of its commitment to children in England as it announced a further £1.4bn in investment to tackle the consequences of disruption to schooling during the pandemic. The Department for Education said it would expand its tutoring fund by £1bn, with a further £400m for teacher training. The total will support 6m 15-hour tutoring courses for disadvantaged children and expand tuition for those aged 16 to 19, it said. The announcement is part of the plan to support children in England after face-to-face teaching was suspended during the pandemic and adds to £1.7bn already committed.

USD

The dollar is well bid against most major currencies overnight. The US threatened to slap tariffs on $2bn worth of goods from the UK and five other countries as they argue about how to tax technology companies, a move that risks reigniting transatlantic trade wars unless parties resolve thorny talks over a broader international tax agreement. The office of the US trade representative said it was imposing but immediately suspending for six months the tariffs on Austria, India, Italy, Spain, Turkey and the UK as it wrapped up a series of investigations over the way the countries tax US tech giants. The Biden administration has proposed giving advanced economies powers to raise corporate tax from US tech companies and other large multinationals, while instituting a global minimum corporate tax.

EUR

The euro is lower than the pound and the dollar this morning. France will start vaccinating teenagers from age 12 with the Pfizer BioNTech vaccine on June 15, the government said in a move to help avoid closures of schools in September due to COVID-19 risks. The number of new COVID-19 cases in France meanwhile held below 10,000 for the second day in a row and the daily death toll dropped sharply from last week, further easing pressure on hospitals as the vaccination campaign has expanded. France has gradually been widening vaccine eligibility by lowering age thresholds and removing conditions such as profession or state of health. From May 31, COVID-19 vaccines were made available to everyone over 18.

Markets

Most Asian stocks climbed Thursday and U.S. equity contracts were steady, weathering the latest twist in the U.S.-China relationship as well as comments from the Federal Reserve on a potential reduction in stimulus. Optimism over the vaccine rollout boosted Japanese equities, while Hong Kong retreated. China’s shares edged up despite President Joe Biden’s plans to amend a U.S. ban on investments in companies linked to the Chinese military, which may expand scrutiny to a wider set of enterprises. S&P 500 and Nasdaq 100 futures were slightly in the green after modest gains for both benchmarks, and European contracts were also a touch higher. Gold was at $1,901.83 an ounce, down 0.3%.

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

9:00 a.m.: Turkey May CPI, PPI

9:15 a.m.: Spain May Services, Composite PMI

9:45 a.m.: Italy May Services, Composite PMI

9:50 a.m.: France May Services, Composite PMI

9:55 a.m.: Germany May Services, Composite PMI

10:30 a.m.: U.K. May Services, Composite PMI

10:30 a.m.: Spain sells bonds

10:50 a.m.: France sells bonds

2:15 p.m.: U.S. May ADP Employment

2:30 p.m.: U.S. initial jobless claims

3:45 p.m.: U.S. May Services, Composite PMI

4:30 p.m.: EIA Crude Inventory Report

6:00 p.m.: BOE’s Bailey speaks

EU’s top court rules in Hungary’s challenge of EU Parliament’s decision to open Article 7 procedure

St Petersburg International Economic Forum

Corporate Events

Earnings include Remy Cointreau, Broadcom

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