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.

RBC Capital Markets

Week ahead: Beyond the BoC’s BOS and the RBA announcement, the rest of the week is relatively quiet. In G10, the main data is Canada’s June employment report (Friday).

CAD: Today’s BOS should reflect conditions at the beginning of the recovery, with an estimated survey period of mid‐May to mid‐June. The previous iteration was conducted before the COVID‐19 lockdown, and while most categories saw some softening, they clearly did not reflect the full lockdown impact. Therefore, universal deterioration in the fixed data questions is essentially guaranteed, especially on the investment intentions, capacity pressures, employment and inflation expectations components. Given the survey period, the BoC’s comments should reflect some indication of the reopening, and these should be even more closely watched than usual.  Recent communication from the BoC has emphasized a two‐ stage recovery, meaning an initial bounce higher, followed by a longer path to full recovery. Later in the week, RBC economics expects a 650K job gain in June (Friday) following the surprise 290K increase in May. The latter came with a 200K increase in those classified as unemployed as well, the combination resulting in the unemployment rate rising to 13.7%. Movements in and out of the labour force should continue to complicate the interpretation of that number, and we pencil in a decline to 13.2% in June.

AUD: Tonight’s RBA meeting is unlikely to bring any changes to policy settings, but we’ll be keeping an eye out for any economic forecast tweaks ahead of the August quarterly statement as Australia continues to weather the COVID storm better than most. Deputy Governor Debelle reaffirmed this week that the RBA would likely keep the target cash rate at its present 0.25% setting forseveral years to come, and this tone is unlikely to change in the full July board meeting despite a faster than expected recovery to date.

GBP: On Wednesday, Chancellor Sunak will give more details of the spending plans outlined by PM Johnson last week, though it is likely there will be little new beyond possible timing shifts to spending commitments already made. The week ahead is otherwise very quiet in the UK.

Citi

Asia saw a very constructive session for risk assets. Positive sentiment from last week’s data beats (NFP, ISM manufacturing, Chinese PMIs) has likely driven the moves here absent specific headlines over the weekend and in the Asia session. Chinese assets are in particular focus following a 4.7% rally in SHCOMP – CNH outperforms Asia FX too, with KRW closely tracking. Elsewhere, we see solid performances in EUR, AUD and NZD, while S&P futures trade +1.2% at 3166. A number of technical levels are in play as we outline below.

Looking ahead, USD ISM non-manufacturing could continue to spur this risk rally. Data elsewhere is fairly light, with Germany factory orders, EUR retail sales, GBP construction PMIs and CAD’s BOS survey in G10. EM waits an ILS rate decision (hold) and MXN gross fixed investment.

The ISM non-manufacturing index should rebound to 50.8 in June from 45.4 in May, consistent with the ISM manufacturing index also rising into expansionary territory in June. As many businesses reopened throughout June, activity should rise from a very low level. We expect increases in all of the three activity related subcomponents – new orders, production, and employment. Indeed, a strong ~4.3 million increase in service-industry payrolls indicates that hiring picked-up in June. We expect that service sector activity will continue to strengthen over the summer months, although rising virus case counts in some states do increase risks of renewed business shutdowns or a potential levelling off in activity as reopening plans are stalled.

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.

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