The Investment Bank Outlook 22-06-2020

<p>In our Investment Bank Outlook each week, we bring you a selection of perspectives from leading investment banks to outline the key issues and directional views for the week ahead. These excerpts, taken from research notes, will cover issues such as key market themes, economic releases, as well as any major trends and levels to watch. Please note, this material, which does not reflect the opinions of Tickmill, is provided for educational purposes only and should not be taken as an investment recommendation.</p>
<h2><strong>RBC Capital Markets</strong></h2>
<p><strong>Week ahead: </strong>There are no first‐tier data releases in <strong>the US </strong>this week and Thursday’s May durable goods orders are pick of what we do have. Outside the US, we get the first indications on economic activity in June in the <strong>Eurozone and UK </strong>(flash PMIs due tomorrow). After Macklem’s speech today, there is nothing notable in <strong>Canada</strong>. RBNZ is the only G10 central bank announcing this week (Wednesday; see NZD), while in EM, we have CBRT and Banxico (both Thursday). The IMF releases updated Word Economic Outlook forecasts on Wednesday.</p>
<p><strong>NZD: RBNZ announces on Wednesday </strong>and is universally expected to keep rates at 0.25%. Attention will likely focus on Governor Orr’s comments on the risk of negative rates, which he has repeatedly refused to rule out recently. Forward rates dip slightly below zero at around this time next year and as such, Orr would need to be very dovish to do much damage to NZD at this meeting.</p>
<p><strong>CAD: Today’s speech is Macklem’s first full speech as Governor. </strong>His comments to date have been largely consistent with the BoC’s previous communication that it is protecting against deflation risks and a protracted recovery is likely. Macklem has repeated that the current 0.25% overnight rate setting is the effective lower bound, eschewing negative rates.</p>
<p><strong>EUR: The Eurozone PMIs are expected to rebound further in June (tomorrow). </strong>Euro area member states have accelerated their reopening plans ahead of schedule due to consistently falling coronavirus new cases. This easing of lockdown measures is captured in the Oxford COVID‐19 Government Response Tracker, which has shown that the stringency of measures in June is on average 55, weighted by GDP across the big 4 member states, versus 73 in the first 20 days of May. Hence, we would expect to see the PMIs in Germany and Italy outperform those in France and Spain in June.</p>
<p><strong>GBP: This month’s ‘flash’ PMI reading </strong>(tomorrow) will again be influenced mainly by the extent of reopening of the economy at the time when the fieldwork for the survey was conducted. As lockdown restrictions were eased from mid‐ May onwards, businesses have been reopening. With the ‘flash’ survey typically conducted sometime in the middle two weeks of the month, that gradual reopening of the economy should, even if retail is excluded from the survey, ensure that the Services PMI shows further improvement this month.</p>
<p><strong>AUD: Early indications point </strong>to a lift in May skilled vacancies, but the quarterly ABS vacancies may be more mixed given their lagging nature.</p>
<h2>Citi</h2>
<p>Markets slid into Friday’s NY close on news that Apple will close 11 stores in 4 states in the US. Sentiment at the Asia open was weighed as a follow on from this, however, we have retraced earlier losses on news that Beijing cases appear to be under control – 9 new cases were reported overnight. The government last week also declared that the peak has passed for the outbreak. Looking at FX, we see <strong>AUD</strong> outperforming in G10, up to 0.6875 (+0.6%) helped by comments from Governor Lowe that he doesn’t see AUD as overvalued. Meanwhile <strong>NZD </strong>and <strong>GBP</strong> are close behind. <strong>EURUSD</strong> is also trading higher approaching the 1.12 handle. <strong>S&amp;P futures</strong> also reversed declines down to 3030, to now trade at 3080 at the time of writing. However, risks are growing and could bite this week onwards…</p>
<p><strong>USD</strong>: In the US, we remain on watch to see if other companies follow on in Apple’s shoes. However, we think another US lockdown is unlikely for now.<strong> </strong>The reinstatement of state stay-at-home orders seems unlikely, given limited public and political appetite. Instead, the current pace of easing could be paused, or other measures like mandatory face masks seem likely. However, if hospitals start to become overwhelmed, then the situation could change.</p>
<p><strong><i>Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.</i></strong></p>
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