The Morning Hark - 20 June 2024
Today’s focus...Juneteenth brings peace. BoC deliberations “justify” their cut with more to come. Super Central Bank Thursday ahead.
Overnight Highlights
Prices are at 6.35 BST/1.35 EST, with changes reflecting movement from midnight GMT
Oil - Oil unchanged in Asia with Brent and Crude August futures currently at 85.20 and 80.60.
EQ - Asian equity markets mixed overnight with the Hang Seng off close to one percent to 18,300 on the back of no move from the PBoC. Meanwhile Nikkei futures currently unmoved at 38,560.
The US indicies firm with the S&P and Nasdaq futures now at 5575 and 20,325 respectively.
Gold - Gold up smalls in Asia with the August futures trading currently at 2355.
FI - US yields a touch firmer in Asia with the US2y futures trading at 4.74% whilst the US10y futures yield at 4.25%.
European yields little changed yesterday with the German 10y closing at 2.41% and the Italian 10y yield at 3.94%.
UK gilt 10y at 4.07%.
FX - The USD flat in Asia with the USD Index currently at 105.29. The majors now trading at; JPY, EUR and GBP 158.20, 1.0740 and 1.2710 respectively. USDJPY knocking on recent highs.
Today’s major FX option expiries we have in the EURUSD; $€2bn at 1.07 and € 1.3bn at 1.08.
Others - Bitcoin and Ethereum all rather dull with the pair currently at 65,400 and 3580 respectively.
Macro Themes At Play
Recap
UK Inflation Report for May was pretty much in line with headline MoM coming in a touch softer than expected at 0.3% whilst core remaining elevated at 0.5%. The YoY headline did reach the “target” 2% to continue the downward trend this year but not below. Core however still sticky as with it in line with expected at 3.5%. However, as with headline, the trend this year is a downward one.
BoC Summary of Deliberations
From the earlier June meeting where the Bank cut rates by 25bps to 4.75%.
On the Canadian economy the BoC pointed to growth in q1 as being slower than forecast, but domestic spending was solid.
Meanwhile business investment and exports contributed positively, while inventory drawdown went the other way. Labour market wise there was slower job creation with annual wage growth around 4%. Finally inflation edged down to 2.7% in April, with core inflation also easing.
On policy the BoC pointed to progress towards the 2% inflation target and the need for continued restrictive monetary policy. There were risks around future inflation, including mortgage renewals, wage growth, housing market, population growth, and geopolitical tensions.
They stressed that with four consecutive months of easing in core inflation and indicators suggesting continued downward momentum, there had been sufficient progress to warrant a first cut in the policy rate.
In addition they pointed out that if inflation continued to ease, and remained on a sustainable track to the 2% target, further gradual cuts to the policy rate were reasonable. On that basis they would closely watch core inflation and four key indicators: supply and demand balance, corporate pricing, inflation expectations, and wage growth relative to productivity.
The Day Ahead
The China Loan Prime Rate Announcements as expected were left unchanged.
The morning is dominated by Central Banks with SNB, Norges and the BoE all making rate announcements.
SNB the one to watch for a move with a good fighting chance of a further cut from them.
Norges steady as she goes. Nothing to see here
BoE will give a nod to headline hitting target but will give two nods to core remaining stickily high.
The afternoon sees some US Housing Data for May and the Philly Fed Survey for June.
The June Flash PMIs start hitting the tapes overnight as does Japan’s Inflation Report for May.
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Main Highlights Ahead
All times in BST (EST+5 / CET-1 / JST-9)
The main highlights for the day ahead ahead in terms of data and speakers:
Thursday
SNB Interest Rate Decision rates to remain on hold at 1.5% (08.30 BST)
Norges Bank Interest Rate Decision rates to remain on hold at 4.5% (09.00 BST)
Norges Bank Monetary Policy Report (09.00 BST)
BoE Interest Rate Decision rates to remain on hold at 5.25% (12.00 BST)
BoE MPC Meeting Minutes (12.00 BST)
US Building Permits Prel May consensus 1.45m vs previous 1.44m (13.30 BST)
US Housing Starts May consensus 1.37m vs previous 1.36m (13.30 BST)
US Philadelphia Fed Manufacturing Index June consensus 5 vs previous 4.5 (13.30 BST)
US Philly Fed Business Conditions June consensus vs previous 32.4 (13.30 BST)
US Philly Fed Employment June consensus vs previous -7.9 (13.30 BST)
US Philly Fed New Orders June consensus vs previous -7.9 (13.30 BST)
US Philly Fed Prices Paid June consensus vs previous 18.7 (13.30 BST)
Fed Speakers
Barkin (21.00 BST)
ECB Speakers
Centeno (09.30 BST)
Early Friday
Australia Judo Bank Manufacturing PMI Flash June consensus vs previous 49.7 (00.00 BST)
Australia Judo Bank Services PMI Flash June consensus vs previous 52.5 (00.00 BST)
Japan Inflation Rate MoM May consensus % vs previous 0.2% (00.30 BST)
Japan Inflation Rate YoY May consensus % vs previous 2.5% (00.30 BST)
Japan Core Inflation Rate YoY May consensus 2.6% vs previous 2.2% (00.30 BST)
Japan Jibun Bank Manufacturing PMI Flash June consensus 50.6 vs previous 50.4 (01.30 BST)
Japan Jibun Bank Services PMI Flash June consensus vs previous 53.8 (01.30 BST)
Good luck.
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