Starmer to give 'last-ditch' speech after disastrous local election results

Good morning

Friday’s nonfarm payroll headline number came in at +115k, a lot higher than expected, with a small upward revision to previous data as well.  The unemployment rate was unchanged at 4.3%, the only negative thing was a lower than expected average earnings number, with a downward revision to the previous month.  The US dollar spiked higher initially as eyes were drawn to the headline number, then reversed as the details became clearer.  In the end the likes of GBPUSD and EURUSD ran into the weekend just smidge higher than pre-nonfarm levels.

European equities finished lower on Friday but US markets ended the week on a high, Nasdaq leading the way up 1.7%, still pushed by chip/AI stocks making some incredible gains.  Trump’s rebuttal of Iran’s response to the US peace plan led to oil prices and the USD pushing higher on the open, GBPUSD fell from 1.3630 to 1.3550, EURUSD from 1.1785 to 1.1745, both are now off those lower levels, around 1.3600 and 1.1765 respectively.  USDJPY finally succumbed to USD pressure, moving up from 156.55 to current levels around 157.15.

Canada released some weak jobs data on Friday, the unemployment rate ticked up to 6.9% and the net change in employment was -17.7k from an expected +15k.  The softer data, plus ongoing concerns over US/Canada trade relations, has seen USDCAD push from a low last week around 1.3580 to the 1.3710 area that has capped the upside since mid-April.  I’ve seen interest in upside USDCAD positioning through option, for example a one month (11^th June) 1.3750 call costing around 35 cad pips.

Starmer will be speaking this morning after the massive Labour losses in the local elections last week.  Pressure on him to resign is growing but he looks like he’ll cling on to power as long as he can, pulling in old stalwarts such as Gordon Brown and Harriet Harman in an effort to garner support.  Watch for comments about significant changes and closer ties to the EU.  There are growing concerns that Europe, UK included, will be more reliant on US energy supplies the longer the Strait of Hormuz is closed, which in turn would give Trump strong leverage in trade negotiations. 

Trump will meet China President Xi later this week, no doubt China will push US to end the Iran war and get the Strait of Hormuz open, I could imagine Trump asking for China help with that.  US TrsSec Bessent will stop off in Japan where he’ll meet PM Takaichi and FinMin Katayama, look out for any joint statement on currency intervention.

I’m watching this Hantavirus with a bit of interest although I don’t see it as ‘another Covid’.  Still, a degree of caution seems sensible and passengers on the ship with the outbreak are reportedly in quarantine.   

In sport, Arsenal held their lead at the top of the table, helped with a last minute VAR call that ruled out a West Ham equaliser.  I didn’t know whether to cheer or not!  The result ensures Leeds will avoid relegation, while Notts Forest’s point against Newcastle ensures their Premier League survival.  It is now between West Ham and Spurs, the latter faces a massive make or break match against Leeds this evening.

It’s a quiet economic calendar today.  We’ll have US CPI, PPi and retail sales through the week, plus UK and EU GDP numbers.  We’ll also have inflation expectations from NZ and Australia and plenty of speeches from central bankers.

Have a great day…

-  10.00 UK PM Starmer speaks

-  15.00 US existing home sales

-  00.01 UK BRC retail sales

-  07.00 German HICP