September 7, 2021

“The dollar hovered near recent lows on Tuesday as traders braced themselves, taking a cautious approach before a series of central bank meetings from Europe to Canada to Australia, looking for any signal that central banks are heading back towards policy normalization. A delay to tapering stimulus in the US is looking likely, after weaker than expected jobs data last week has placed pressure on the dollar.”

Tim Hallinan, Trading Director

Main Headlines

Expanded unemployment benefits which have supported millions of Americans to stay financially afloat during the pandemic have now expired, cutting off 7.5 million people from state support as the Delta variant continues to surge in the United States. The $1.9 trillion economic aid package Mr. Biden signed in March included extended and expanded benefits for unemployed workers, like a $300-per-week federal supplement to state jobless payments, additional weeks of assistance for the long-term unemployed and the extension of a special program to provide benefits to so-called gig workers who traditionally do not qualify for unemployment benefits. The Biden Administration has not objected or acted on the end of aid.

Boris Johnson is due to defy strong criticism within the Conservative party as he looks to unveil a £10bn-a-year tax rise to fund the NHS and social care, a measure designed to tackle NHS waiting lists and a spiralling funding crisis. Rishi Sunak and Boris Johnson tried to convince MPs on Monday that a hike of 1.25% in National Insurance for employers and employees was unavoidable. The rise in National Insurance aims to garner £30bn over the next three years  to pay for social care reform in the UK and will be sold as an emergency support measure for the NHS. The move is the latest step by Sunak to reign in public borrowing ahead of the autumn budget on October 27^th.

GBP

Sterling is lower against the dollar and the euro overnight. Boris Johnson sought to appease a frustrated House of Commons as he revealed 311 Afghans who had supported the U.K. remained in Afghanistan. The prime minister claimed that every effort was being made to evacuate those remaining in Afghanistan. The U.K. will launch a fresh push to convince G7 partners to bolster online privacy by cracking down on internet tracking via cookies. Elizabeth Denham, the UK’s data protection watchdog will lobby for a less intrusive alternative system in which people set their privacy preferences a single time. The U.K.’s economic recovery will withstand an autumn rise in new cases, citing economists and epidemiologists.

EUR

The euro is higher against sterling but lower against the dollar in early morning trade. Germany’s Ambassador to China dies only days after their appointment. The exact cause and time of Jan Hecker’s death remains unclear, according to the Germany Foreign Ministry. Heck, formerly Angela Merkel’s diplomatic and security adviser had only been in his post in Beijing for two weeks. Two key Belarusian opposition figures, Maria Kolsenikova and Maksim Znak, were sentenced Monday to long prison terms after being convicted of attempting to seize power illegally, according to a state prosecutor. Kolesnikova was handed an 11-year jail term while Znak was sentenced to 10 years. Former European commissioner John Dalli will face charges as part of a bribery scandal that resulted in his resignation from the Commission in 2012, appearing in court in Malta again later this month.

USD

The dollar is well-bid against most major currencies overnight. Democrats in the United States moved to expand the social safety net with lawmakers set to begin drafting a $3.5 trillion social policy bill that lawmakers will begin drafting this week, which will be all-encompassing, touching the lives of Americans old and young across the country. President Biden, who has staked much of his domestic legacy on the measure’s enactment, will need the vote of every single Democrat in the Senate, and virtually all Democrats in the House, to secure it. Democratic senators, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona are set to oppose such a costly Social Care Bill, teeing up the legislation to be as controversial as the Affordable Care Act.

Markets

Most Asian stocks rose Tuesday as Japan extended a rally and traders took heart from indications that the global recovery is weathering challenges from the delta virus variant. Japan’s Nikkei 225 hit 30,000 for the first time since April as an index reshuffle added to optimism that a new prime minister will usher in favourable policies. China climbed, aided by a rebound in technology stocks and a surprise surge in trade to records. S&P 500 and Nasdaq 100 futures were up ahead of a resumption in U.S. markets after a holiday. European contracts were steady. Treasury yields pushed higher, and dollar was little changed. New Zealand’s 10-year yield rose to the highest since April 2019. Oil was supported by the China trade data. Bitcoin topped $52,000. El Salvador bought 400 coins ahead of adopting the cryptocurrency as legal tender on Tuesday.

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

7:10 a.m.: BOE’s Mann speaks

7:45 a.m.: Switzerland Aug. unemployment

8:00 a.m.: Germany July industrial output

8:00 a.m.: Norway July industrial output

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

9:30 a.m.: BOE’s Saunders speaks

10:30 a.m.: Spain to sell bills

11:00 a.m.: Euro-area 2Q employment, 2Q GDP

11:00 a.m.: Germany Sept. Zew survey

11:00 a.m.: U.K. to sell bonds

11:15 a.m.: Switzerland to sell bills

11:15 a.m.: Austria to sell bonds

11:30 a.m.: Germany to sell linkers

11:30 a.m.: Belgium to sell bills

11:30 a.m.: ESM to sell bills

12:30 p.m.: U.K. to sell bonds

4:00 p.m.: Turkey to sell bonds, linkers

Bank of Italy Report on Balance-Sheet Aggregates

Corporate Events

Earnings include Partners Group, Exor, Wendel, Dermapharm, Salvatore Ferragamo, Samolet Group

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