Tuesday 8 June, 2021

“The dollar found support today as investors looked to US inflation data due later in the week after softer-than-expected jobs data eased. But, worries remain that the Fed may start discussing tapering asset purchases at next week’s FOMC meeting, even more so since Treasury Secretary Janet Yellen’s comment that higher US interest rates would be good for the economy.”

Sam Cornford, Senior FX Dealer

Main Headlines

US Justice Department officials said that they have recovered $2.3m worth of the ransom payment made to hackers who shut down the Colonial Pipeline last month and disrupted the country’s fuel supplies for several days. Officials have identified a virtual wallet used by suspected Russia-based ransomware group DarkSide from which they seized the funds in a rare instance of a ransom recovery. Executives from the US’s and UK’s biggest airlines have issued a joint appeal for Joe Biden and Boris Johnson to use this week’s G7 meeting to reopen transatlantic air travel. They were prepared to back vaccination and testing requirements instead of quarantine to facilitate this.

The UK government narrowly avoided a backbench rebellion over foreign aid on Monday, after the Speaker of the House of Commons refused an amendment that could have forced ministers to reinstate the budget for overseas spending after it was cut by almost a third last year. More than 30 Conservative backbenchers including former PM Theresa May pledged to support an amendment to the Advanced Research and Invention Agency bill led by former international development secretary Andrew Mitchell. Frontex, the EU’s embattled border and coastguard agency, is on the back foot again after the release of a critical audit report yesterday.

GBP

The pound is lower than the dollar and higher than the euro in the early morning trade. The UK’s biggest tech companies have called on the government to take immediate action to address a shortage in digital skills holding back the post-pandemic economic recovery. Employers including Microsoft, Google and software company Salesforce on Tuesday urged ministers to work more closely with industry to address the lack of digital skills, which is costing the UK economy billions of pounds. The calls came in a report by TechUK, a trade body that represents hundreds of UK and multinational tech groups. NESTA, a think-tank, found data-driven skills shortages cost the UK economy £2bn annually.

USD

The dollar is well bid against most majors this morning. Finance ministers are plotting a raid on Amazon’s lucrative cloud-computing business to ensure it pays more corporate tax under the new G7 agreement on a global rate. Despite Amazon appearing to fall outside the profit margin threshold set by the G7, the $1.6tn tech group will have to pay more corporate tax in some of its largest markets if the agreement on a global rate is ratified. Amazon did not start to generate significant profits until 2017, and they have consistently been below the 10 per cent margin threshold set by the G7.

EUR

The euro is stronger than the dollar but weaker than the pound overnight. Bosch, Europe’s largest auto supplier, has warned car manufacturers that they must put “money on the table” and make a “rock solid” commitment to orders if they are to avoid a repeat of the chip shortage bedevilling the industry. “The only way to get out of [the recent crisis] is to have a different level of commitment,” Harald Krüger, a board member at the privately owned German group, told the Financial Times. Automakers can no longer make last-minute decisions based on fluctuations in demand, said Krüger, pointing to the long lead times in chip production and increasing demand for the semiconductors.

Markets

A number of Asian stock markets edged back Tuesday as investors await more clues on whether the recovery from the pandemic will stoke price pressures and imperil loose monetary policy. The dollar rose. Shares from Japan to China pared or reversed gains. U.S. futures gave back earlier advances, leaving S&P 500 contracts flat and those on the Nasdaq 100 slightly higher. The S&P 500 was steady near a record overnight, while a rally in Biogen Inc. on approval of its Alzheimer’s drug lifted the Nasdaq 100. Gold was at $1,896.52 an ounce, down 0.1%.

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

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

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

10:00 a.m.: Italy April retail sales

10:30 a.m.: Spain sells bills

11:00 a.m.: U.K. sells bonds

11:00 a.m.: Germany, Euro-Area June ZEW Survey

11:00 a.m.: Euro-Area 1Q GDP, Employment

11:30 a.m.: Germany sells bonds

12:30 p.m.: U.K. sells bonds; ESM sells bills

3:00 p.m.: BOE’s Haldane speaks

WTO meets to discuss vaccine facilities

EU home affairs ministers meet

International war crimes tribunal for the former Yugoslavia delivers verdict on Ratko Mladic

Corporate Events

Gundlach’s DoubleLine Total Return webcast

Bloomberg Deals Summit

FIA and SIFMA host Asset Management Derivatives Forum

Sales results include BATS

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