The Investment Bank Outlook 13-07-2020

<h2>RBC Capital Markets</h2>
<p><strong>Week ahead:</strong> Three G10 central banks announce policy this week – the BoJ (Wednesday), BoC (Wednesday) and ECB (Thursday) and the European Council meeting will be another key focus (Friday, see EUR). On the data front, US June retail sales (Thursday) should confirm retail activity continued to rebound in the month, while May monthly GDP data in the UK (tomorrow) should show the first signs of recovery from the trough in activity in April. Elsewhere, we have labour market reports in the UK and Australia (both Thursday). Outside the macro data, the focus will be on the start of the US earnings season, with several US banks reporting tomorrow and more later in the week.</p>
<p><strong>EUR:</strong> EU leaders will meet physically in Brussels to discuss the European Rescue Fund to respond to the COVID‐19 crisis and a new long‐term EU budget. Following a meeting in mid‐June, Charles Michel, President of the European Council, held political negotiations with EU leaders and some of the opponents of the fund have signalled more warmth to the proposals, although disagreements remained. Our economists are optimistic that an agreement on the European Recovery Fund can be reached, though it is touch and go whether this can happen in time for the July 17‐18 summit.</p>
<p>Ahead of the EC meeting, the ECB announces policy on Thursday but it is unlikely that the meeting will deliver any substantial changes given that the PEPP programme was expanded only in June. However, as always there will be a lot of scrutiny on the portrayal of the economic recovery as well as the risks around it and our economists do not rule out an increase in the tiering multiplier.</p>
<p><strong>JPY:</strong> Tertiary activity fell 2.1% m/m in May following a 7.7% fall in April and the data look like they are heading for a 5%+ fall in Q2 as a whole. The BoJ’s forecasts will be updated alongside its policy announcement on Wednesday and prospects have deteriorated further since the last update in April, likely requiring downward revisions to GDP and CPI forecasts. The BoJ is expected to leave the policy rate and yield target unchanged, however.</p>
<p><strong>CAD:</strong> We do not expect any policy changes at next week’s BoC meeting and MPR, new Governor Tiff Macklem’s first in charge. GDP in the second quarter looks set to be in the upper‐end (less‐bad) of the 10‐20% below 2019‐Q4 range outlined in the June meeting statement. A central scenario – essentially a forecast with less certainty – is likely to be provided next week and this should show a significant output shortfall at the end of 2020 vs 2019Q4 (we have about ‐5.2% Q4/Q4). No take‐up in recent BA purchases and term repo operations, along with generally accommodative financial and credit conditions means program tweaks should be minor (if present at all).</p>
<p><strong>GBP:</strong> The drop in GDP in April of 20.4% likely marked the peak of the impact of the coronavirus pandemic. A wide range of expectations centre on a 5% m/m rebound in the May data (tomorrow).</p>
<h2>Citi</h2>
<p><strong>EUR</strong> is eyeing the 1.1350 resistance level overnight, having traded up to 1.1330 at the time of writing. In the week ahead, CitiFX Strategy thinks:</p>
<ul>
<li>We expect Friday’s EU Council to arrive at broad agreement on the EU Recovery Fund. However, there it’s also plausible that the negotiations are not concluded, which would only be short-term disappointment, as eventual agreement remains very likely. We continue to see EURUSD upside in coming weeks. German Chancellor Merkel meets the Italian PM on Monday, the Spanish one on Tuesday and French President Macron speaks on Wednesday</li>
<li>At Thursday’s ECB meeting, we expect President Lagarde to stay the course, without major dovish or hawkish changes in communication, in contrast to some recent hawkish noises. We think there is a good chance that the ECB raises the tiering multiplier which could push up EUR and short-term market rates temporarily.</li>
</ul>
<p>–    <strong>GBP</strong> sees CitiFX Strategy turn tactically bullish as investors have been bearish GBP and deal optimism has further room to run, in addition to significant fiscal measures announced by UK Chancellor Sunak, with further support likely in the autumn. Overall though, we retain our structurally bearish GBP view which is mainly concentrated in Q4. Today, BoE Governor Bailey and Fed’s Williams discuss Libor at 16:30 BST – this is not expected to be market moving.</p>
<p>–    <strong>USDJPY </strong>remains virtually unmoved in Asia, trading at 106.89 at the time of writing. Looking ahead, the BoJ meeting on July 14-15 should see no policy change even though the economic forecast will likely be lowered in the updated outlook report. USDJPY rallies will continue to be capped by exporter hedging, slowing foreign investment flows by local investors and US yield curve bull flattening.</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>
<p><strong><i>High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.</i></strong></p>
<p>The post <a rel="nofollow" href="https://blog.tickmill.com/fund-analysis/the-investment-bank-outlook-13-07-2020/">The Investment Bank Outlook 13-07-2020</a> appeared first on <a rel="nofollow" href="https://blog.tickmill.com">Tickmill</a>.</p>