Wednesday, 2 June, 2021

“The dollar edged back from near five-month lows versus major peers, as a pick up in U.S. manufacturing lead to small overnight gains. Again, market participants are hoping to get more specifics about the timing of the Fed’s stimulus withdrawal – eyeing June 16^th this time.”

Sam Cornford, Senior FX Dealer

MAIN HEADLINES

Economic growth in the United States is reaching its fastest pace in forty years, according to the OECD. US GDP is forecast to grow at a rate of 6.9% in 2021, the biggest increase since 1984. This is due to unprecedented levels of fiscal stimulus provided by the US government, which is driving up spending, as well as boosted consumer confidence as vaccination rates continue to soar. The increase stands in stark contrast to 2020, when US GDP contracted by 2.5%.

The UK will begin the process of joining a Trans-Pacific regional trade deal, after member nations agreed to allow it, Japan’s economy minister said. Yasutoshi Nishimura said the move would strengthen economic ties between the U.K. and Japan, as well as making the zone covered by the deal equal to the EU in terms of economic size. Britain and Japan reached a bilateral trade agreement last year, and the UK also has separate pacts with other member countries including Canada, Singapore and Vietnam.

GBP

Sterling is weaker than most majors in early morning trade. The Brexit Minister, Lord Frost, has reiterated that the Northern Ireland Protocol is not fit for purpose in the long-term, amid talks with EU officials to simplify the protocol’s operation. The protocol covers 30 areas of cross-border movement, including the movement of food from Great Britain to Northern Ireland. European Commission Vice-President, Maros Sefcovic and Lord Frost are set to meet next week to iron out areas of concern. U.K. COVID-19 deaths hit zero for the first time on Tuesday, however, fears remain that the India variant could cause a spike reminiscent of last summer if lockdown easing continues.

USD

The dollar is higher against most majors this morning. Biden has promised to tackle unequal voting rights across America, tasking Vice-President Kamala Harris to act in Congress as part of a broad legislative effort to protect voting rights. Meat supplier JBS, one of the world’s largest meat processing companies was the victim of a sophisticated ransomware cyber-attack. JBS’ operations in Australia, Canada and the US were affected. A White House spokesperson alleged that responsibility for the attack lies with a criminal gang, potentially located in Russia.

EUR

The euro is stronger against the pound and unchanged against the dollar overnight. Bulgaria, the Czech Republic, Denmark, Germany, Greece, Croatia and Poland have unveiled a digital COVID-19 certificate system, intended to ease travel between EU nations. The system will record whether citizens have been fully vaccinated, recovered from COVID-19 or tested negative within 72 hours. The EU said all 27 member states would employ the digital green certificate system from July 1^st. Meanwhile, Danish broadcaster, DR, reported that Denmark and the US National Security Agency collaborated to gather information on European politicians from 2012 to 2014, including Angela Merkel.

 MARKETS

Asian stocks remained steady on Wednesday after U.S. equities inched lower. Japanese stocks outperformed and robust economic figures boosted Australian equities. Stocks in Hong Kong and China fell. U.S. equity futures were flat and European contracts rose after the S&P 500 closed slightly lower. U.S. manufacturing data topped estimates overnight but also signalled supply shortages and labour constraints. Oil reached a more than two-year peak. Benchmark 10-year U.S. Treasury yields remain unchanged.

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

8:00 a.m.: Germany April retail sales

9:00 a.m.: Spain May unemployment

10:30 a.m.: U.K. April mortgage approvals

11:00 a.m.: Euro-Area April PPI

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

11:30 a.m.: Germany sells bonds

12:15 p.m.: ECB’s Villeroy speaks

12:30 p.m.: U.K. sells bonds

St. Petersburg International Economic Forum

Green Swan Conference

Deadline for Israel opposition to propose new coalition

ECB to publish a report on the international role of the euro

Corporate Events

Earnings include Clas Ohlson, Wizz Air

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