The Investment Bank Outlook 15-06-2020

<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>RBC Capital Markets</h2>
<p><strong>Week ahead:</strong> After the BoJ announcement tonight, three more G10 central banks announce this week: the BoE, SNB and Norges Bank (all Thursday). All three are expected to keep their main policy rates unchanged. In EM, BCB is expected to cut rates by 75bp (Wednesday). Data‐wise, tomorrow’s May US retail sales are the highlight and are expected to rebound significantly, which will mostly be a story about coming off extremely depressed levels of activity. With states only beginning to hit various phases of re‐ opening during the month of May (and some still practically closed) retail activity will likely still be well off the pre‐COVID levels even after a significant sequential bounce. Indeed, even if our expected 10% gain in topline retail sales comes to fruition, activity will still be about ‐15% down from pre‐COVID levels. Outside the US, we have CPI reports in the UK and Canada and labour data in the UK and Australia.</p>
<p><strong>GBP:</strong> PM Johnson meets with von der Leyen today to try to move forward on the UK’s trade relationship with the EU when the transition period ends. Expectations are not high and the risk of the UK trading on WTO terms at that time rises with each day that passes. With the UK having formally said it will not request and extension to the transition period, there will be weekly negotiations between UK and EU officials for the next five weeks.   The most significant reopening of economic activity in the UK starts today, with non‐essential retailers trading, subject to social distancing constraints. Later this week, we have labour market data (tomorrow), CPI (Wednesday) and the BoE policy announcement (Thursday). Our economists expect a further GBP200bn expansion of asset purchases at this week’s meeting.</p>
<p><strong>JPY:</strong> The BoJ is expected leave its policy rate and yield target unchanged tonight. The fanfare that accompanied the move to unlimited bond purchases at the April meeting only served to highlight how limited the BoJ’s policy options are. Tertiary activity fell slightly less than expected in April (‐6.0%; consensus ‐7.7% m/m).</p>
<p><strong>AUD:</strong> RBA minutes tonight will likely convey a cautiously positive tone consistent with the RBA’srecent communication as restrictions ease sooner than anticipated while incoming data continue to suggest that the worst is behind us. Key messages will, however, remain unchanged including a commitment to scale up purchases if needed and maintain accommodation as long as required. We will be watching the minutes to see if there was any discussion around the strengthening currency with the post board meeting statement conspicuously silent on this topic.</p>
<p><strong>NOK:</strong> Norges Bank is universally expected to leave rates unchanged at zero this week and the onus is largely on fiscal policy supporting activity going forward.</p>
<p><strong>CAD:</strong> We see no reason to deviate from Statistics Canada’s preliminary estimate of  ‐15.6% m/m for April retail sales (Friday) that was released with the March report. We expect a meaningful drop in the average of the BoC’s core inflation measures in May (Wednesday) on broader price softening and tough year‐ago comparables.</p>
<h2>Citi</h2>
<p>Weekend headlines on second waves read poorly and have consequently seen another bout of risk-off descend across markets. Asia traded negatively, and we have seen risk-off accelerate as London wakes up. Headlines were predominantly concentrated in the US in line with last week, but we also saw news out of China that authorities have moved to lockdown Beijing’s largest fruit and vegetable market, as well as surrounding areas. On this, we have seen constructive reports that authorities have moved quickly to trace and test potentially exposed individuals, but risk is paying no attention. In FX, <strong>AUD</strong> and <strong>NZD</strong> underperform while in EM FX, <strong>KRW</strong>, <strong>ZAR</strong> and <strong>MXN</strong> have been particularly hit. Equities also paint a worrying picture with <strong>S&amp;P futures</strong> trading well below the 200d MA, psychological support at 3000 and further support at 2970. We see futures at 2960 at the time of writing (-2%), with Asian indices also a sea of red.</p>
<p>We remain tactically bullish <strong>EURUSD</strong> but, again, are watching new signals carefully on risk aversion and positioning. This week features a likely EUR1tn+ announcement for TLTRO allotment on Tuesday and a video European Council on Friday – we think the headlines will be mixed but despite pushback expectations on track for agreeing on an EU recovery fund in coming months.</p>
<p>We remain bearish <strong>GBP</strong>. Last week confirmed that the UK won’t seek an extension in June, but negotiations continue in July. Monday’s high-level meeting may bring modestly positively headlines, but little new substance. Thursday’s BoE meeting likely brings at least GBP100bn of new asset purchases.</p>
<p>We are neutral for <strong>J</strong><strong>PY</strong> in the short-term. We think the short-term potential for yields and equities is higher. But positioning and domestic flows leave room for JPY upside, certainly over time. We don’t expect any material news from the BoJ on Tuesday.</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 70% 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/market-analysis/the-investment-bank-outlook-15-06-2020/">The Investment Bank Outlook 15-06-2020</a> appeared first on <a rel="nofollow" href="https://blog.tickmill.com">Tickmill</a>.</p>