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Quest Session But Focus Remains On Covid-19 Hotspots

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Fundamental analysis of Forex market

Notes/Observations

  • Quiet EU session but focus on data to suggest the global economy likely passed the lowest point of the crisis.
  • Focus remains on various Covid-19 hotspots

Asia:

  • BOJ Gov Kuroda reiterated stance that BOJ to take additional action without hesitation if needed.
  • Australia PM Morrison noted that the virus outbreak in Victoria was localized, cabinet to maintain plans to further ease restrictions

Coronavirus:

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  • Total global cases 9,588,717 (+1.9% d/d); total deaths: 488.8K (+1.4 d/d%)
  • Texas Gov Abbott halts new phases of the reopening plan for Texas economy Europe:
  • Spain Govt agreed to extend the country’s emergency paid leave schemes for an additional three months to the end of September
  • Germany said to be considering measures against the US to respond to sanctions on Nord Stream gas pipeline

Americas:

  • US Senate passed bill punishing China for Hong Kong security law via unanimous consent. Bill would impose mandatory sanctions on individuals, banks, and other entities that enable China’s violations of the 1984 Sino-British Joint Declaration
  • Federal Reserve Bank Stress Test results noted that the Fed would limit large bank sector dividend payout and buyback schemes to preserve capital during economic downturn. Bank to submit capital plans later in the year

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +0.89% at 362.94, FTSE +1.30% at 6,227.11, DAX +0.62% at 12,254.00, CAC-40 +1.18% at 4,976.69, IBEX-35 +0.35% at 7,296.00, FTSE MIB +1.06% at 19,439.50, SMI +0.47% at 10,137.63, S&P 500 Futures -0.27%]
  • Market Focal Points/Key Themes: European indices open higher across the board but moderated gains as the session progressed to trade mixed; technology sector led to the upside; undeperforming sectors include financials and health care; KLM secures financing from government of The Netherlands; events expected during US session include release of CHMP decisions on medicines approvals

Equities

  • Consumer discretionary: H&M [HMB.SE] -3% (earnings), Air France-KLM [AF.FR] +2% (KLM secures funding), Tesco [TSCO.UK] +1% (trading update), Lufthansa [LHA.DE] -3% (sharehodlers approve rescue package)
  • Technology: Wirecard [WDI.DE] -41% (Philippines CB comments)

Speakers

  • ECB chief Lagarde stated that region likely passed the lowest point of the crisis but recovery would be complicated. Reiterated stance that must use all monetary and fiscal levers. Debt to be massively increase and had to be repaid. EU leaders might not agree on recovery plan at upcoming July 17-18th summit
  • ECB’s Rehn (Finland) stated that the danger of deflation had reemerged
  • EU Commission President Von der Leyen: All member countries must support stimulus plan; need an agreement before the summer holidays
  • Hungary Central Bank Vice Gov Virag stated that he saw room for another rate cut and would recommend one more rate cut in the coming months of 15bps maximum. Further rate cut expectations were excessive and sought to maintain a buffer from zero rates
  • Austria WIFO Researcher updated its Quarterly Economic Forecasts which cut 2020 GDP from -2.5% to -7.0% while raising 2021 GDP growth from 3.5% to 4.3%
  • Norway PM Solberg stated that he saw the impact of economic slump to last through 2021

Currencies/Fixed Income

  • FX price action was quite subdued in a quiet EU session. The USD consolidated its recent gains generated from risk aversion flows over various Covid-19 hotspots and fears over trade wars.
  • EUR/USD stayed above the 1.12 level. Euro stable as ECB chief Lagarde noted that the region likely passed the lowest point of the crisis.
  • USD/JPY continued to hover around the 107 area with little fresh impetus of risk aversion flows seen for the time being.

Economic Data

  • (DE) Germany May Import Price Index M/M: 0.3% v 0.4%e; Y/Y: -7.0% v -6.9%e
  • (NO) Norway May Retail Sales (includes auto/fuel) M/M: +2.8% v -0.5%e
  • (FR) France Jun Consumer Confidence: 97 v 95e
  • (ES) Spain Apr Total Mortgage Lending Y/Y: -17.8% v -7.1% prior; House Mortgage Approvals Y/Y: -18.4% v -14.6% prior
  • (ES) Spain May Adjusted Retail Sales Y/Y: -19.8%e v -31.6% prior; Retail Sales Y/Y: -17.6%e v -31.5% prior
  • (SE) Sweden May PPI M/M: -0.9% v 0.0% prior; Y/Y: -3.8% v -3.0% prior
  • (SE) Sweden May Household Lending Y/Y: 5.1% v 5.2% prior
  • (SE) Sweden May Retail Sales M/M: 0.5% v 0.0%e; Y/Y: 2.4% v 1.5%e
  • (RU) Russia Narrow Money Supply w/e Jun 19th: 12.78 v 12.72T prior
  • (EU) Euro Zone May M3 Money Supply Y/Y: 8.9% v 8.7%e v 8.3% prior
  • (AT) Austria Jun Manufacturing PMI: 46.5 v 40.4 prior (4th straight contraction)
  • (IT) Italy Q1 YTD Budget Deficit to GDP Ratio: 10.8% v 1.6% prior
  • (IS) Iceland Jun CPI M/M: 0.4% v 0.5% prior; Y/Y: 2.6% v 2.6% prior
  • (IT) Italy Jun Consumer Confidence Index: 100.6 v 97.5e; Manufacturing Confidence: 79.8 v 80.0e; Economic Sentiment: 65.4 v 52.7prior

Fixed Income Issuance

  • (IN) India sold total INR320B vs. INR300B indicated in 2025, 2034 and 2050 bonds
  • (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 6-month bills; Avg Yield: -0.224% v +0.012% prior; Bid-to-cover: 1.66x v 1.73x prior

Looking Ahead

  • (PT) Portugal Year-to-Date Budget Report
  • 05:30 (ZA) South Africa to sell combined ZAR1.4.0B in I/L 2025, 2038 and 2050 Bonds
  • 06:00 (UK) DMO to sell £1.5B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £0.5B respectively)
  • 06:45 (US) Daily Libor Fixing – 07:00 (MX) Mexico Apr IGAE Economic Activity Index (Monthly GDP) M/M: -18.8%e v -1.3% prior; Y/Y: -22.0%e v -2.3% prior
  • 07:00 (MX) Mexico May Trade Balance: +$1.3Be v -$3.1B prior
  • 07:30 (IN) India Weekly Forex Reserve w/e Jun 19th: No est v $507.6B prior
  • 08:00 (IN) India announces upcoming bill issuance (held on Wed)
  • 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance (held on Thursdays)
  • 08:30 (US) May Personal Income: -6.0%e v +10.5% prior; Personal Spending: +9.0%e v -13.6% prior; Real Personal Spending (PCE): +8.8%e v -13.2% prior
  • 08:30 (US) May PCE Deflator M/M: 0.0%e v -0.5% prior; Y/Y: 0.5%e v 0.5% prior
  • 08:30 (US) May PCE Core Deflator M/M: 0.0%e v -0.4% prior; Y/Y: 0.9%e v 1.0% prior
  • 08:30 (BR) Brazil May Total Outstanding Loans (BRL): No est v 3.587T prior; M/M: No est v 0.0% prior; Personal Loan Default Rate: No est v 5.4% prior
  • 10:00 (US) Jun Final University of Michigan Confidence: 79.0e v 78.9 prelim
  • (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 2.75%
  • 11:00 (EU) Potential sovereign ratings after European close (Finland Sovereign Debt to be rated by Fitch)
  • 13:00 (US) Weekly Baker Hughes Rig Count data
  • 14:30 (US) Fed Reserve CCAR Report
  • (CO) Colombia Central Bank Interest Rate Decision