USD bid

After the snooze fest that was trading yesterday, we’re ramping up for the heavy hitters on Wednesday.  Citibank’s research shows that trading volumes were 40% lower than the 30-day average on Monday, indicating little interest amid light data.

The NFIB small business optimism index came in lower than expected. US small businesses reported more uncertainty on the outlook largely due to uncertainty on policy. While the survey still sits near historical highs, businesses need clear communication and deliverables on tax, regulation, and healthcare reform to build their confidence.

Today we have JOLTS, wholesale inventories, and Fed member Lael Brainard. JOLTS is the job opening and labor turnover survey from the Department of Labor. It provides a more nuanced view into the dynamics of the labor market and is well known as a favorite indicator of Fed Chair Janet Yellen. While it is not usually a big market mover, it should provide some valuable insight after last month’s payrolls report revealed a mixed picture of US employment.

Brainard’s speech at 12:30 EST could stoke volatility. She will be speaking on normalizing central bank balance sheets – the timing of the balance sheet reduction is a key concern for investors. Brainard is well known as a dovish member of the Fed, so any positive mention of growth or inflation would be dollar-positive.

Pound takes a turn on the slip-n-slide

Sterling slipped this morning off comments from the Bank of England’s deputy governor Ben Broadbent.

Taking it back to Economics 101, Broadbent mentioned two pillars of macroeconomic theory – Adam Smith and David Ricardo.

Citing Smith’s work in the Wealth of Nations, he argues that open trade can be a mutually beneficial agreement as opposed to a zero-sum game. The deputy governor said Britain would suffer if trade with the EU was weakened by Brexit, facing higher prices and lower quality goods Ricardo’s Principles of Political Economy examine trade relations and productivity outside a direct comparison between the two. He emphasized the notion that productivity should be examined in terms of each nation’s domestic economy and the comparative advantage against other sectors at home.

Broadbent’s argument ultimately centers around the benefits that would be lost if trade with the EU were curtailed. The full speech is available here.

Where to?

Talks of the European Union forcing jobs out of the UK have been surfacing after comments from the CEO of JPMorgan Tuesday morning. Jamie Dimon of JPMorgan Chase said the EU could force firms in London to move more employees abroad by imposing banking requirements. Dimon mentioned that his firm, like many others in London, is already preparing to “move several hundred jobs” because of Brexit.

While he says this should be fairly easy, Dimon warns to watch for the other shoe to drop. “If the EU determines over time that they want to move a lot more jobs out of London into the EU, they can simply dictate that.”

Frankfurt seems to be the city of choice for firms looking for a new European hub. Indeed, the CEO of UBS stated that of the three cities they are eyeing, “Frankfurt is a location of choice.”

EURUSD: Euro sits near daily highs against the dollar, holding fast ahead of tomorrow’s speech from Fed Chair Yellen.

GBPUSD: Sterling hanging at the low of the day after a dramatic 40-pip slide following comments from the BoE’s deputy governor.

AUDUSD: Aussie dollar flat against the greenback as the National Australia Bank’s widely-watched monthly business survey only showed a slight improvement in June.

USDCAD: Canadian dollar slightly lower ahead of the much-anticipated Bank of Canada meeting tomorrow.

USDJPY: The dollar sits at four-month highs against the yen as the Bank of Japan’s renewed commitment to monetary stimulus continues to weigh on JPY.