July 11, 2022

Daily Report 11/07/2022

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There was a steadier Sterling tone during Friday as the immediate political hysteria calmed to some extent with markets waiting for further evidence on potential front runners in the Conservative Party leadership race. A calmer tone surrounding risk appetite also provided some support, although underlying reservations over the UK and global economy continued to sap underlying support, especially given important reservations over the UK trade position. Sterling dipped in early Europe as the dollar strengthened, but there was a recovery as the US currency retreated again. Conservative Party candidates tended to focus on the potential for tax cuts which will maintain expectations of a looser fiscal policy and bolster expectations that the Bank of England will adopt a more restrictive monetary policy stance. Weaker risk conditions hampered Sterling gains on Monday as it traded lower against the dollar while the Euro edged higher. Markets will be alert for comments from Bank of England officials with Conservative candidates campaign pledges also significant.

Key Data

BOE Governor Bailey Speech

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The Euro came under renewed selling pressure after Friday’s New York open with the market again attempting to push the Euro towards parity against the dollar. The single currency dipped to fresh 19-year lows just amid a lack of confidence in the Euro-Zone outlook before steadying into the New   York open.

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US non-farm payrolls increased 372,000 for June after a revised 384,000 increase the previous month and above consensus forecasts of a 265,000 increase. All sectors recorded an increase in jobs on the month with a 29,000 gain for manufacturing and rebound in retail jobs. There was an increase in private-sector jobs of 381,000 private-sector jobs while government jobs edged lower on the month. The unemployment rate held at 3.6% and there was a small decline in the participation rate as the labour-force survey recorded a decline of 315,000 in the number employed. The monthly increase in average earnings met expectations at 0.3% with the annual increase at 5.1% from 5.3%. The data signalled that the labour market was still strong, although the household survey will spark some reservations over trends and wage inflation has cooled slightly. The debate between a 50 or 75 basis-point rate hike for July remained open which maintained an important element of uncertainty. The dollar overall edged lower following the jobs data with an element of Euro short covering as sellers looked to take a short-term breather. In this environment, the Euro secured a tentative net gain. Underlying Euro sentiment remained weak and it retreated on Monday as the dollar posted net gains.

Key Data 

Fed William Speech