Week ahead: Virus cases evolvement to drive risk sentiments

Virus cases evolvement to drive risk sentiments. BoE to add more stimulus and BoJ and SNB to stand pat

Risk appetite faded clearly since the middle of the past week. On Wednesday, the Fed took no actions and signaled that the interest rates will remain low for long time period, and policymakers were clear that they will keep their stimulus measures until the economy improves and they assured that they are ready to take more actions if the situation worsens. However, the Fed chief appeared reluctant to commit to yield curve control, a measure that has been widely speculated as the Fed’s next step, and so the risk aversion returned knocking the wind out of riskier assets and helping the safe havens. Risk-off mood deepened more on Thursday, mainly driven by what seemed to be a resurgence in US virus cases, and the second wave of contagion fears. Walls street indexes marked their worst week since March selloff, the dollar ended the week higher while commodity-linked currencies ended lower.

Risk sentiments will be certainly driven by the virus cases evolvement in the coming days, certainly in the US since it should start revealing the impact of the considerable protests that ravaged the nation. Any further resurgence in virus cases and increased second wave fears will further dampen risk-appetite and open the door for an extension in the past week’s moves.

However, there are some important events that should attract market participants’ attention this week. On Wednesday and Thursday the European Union will debate a game-changing 750-billion-euro recovery fund which calls for joint debt issuance and cash grants to poorer, coronavirus-stricken countries. Any downsizing of the rescue fund, is expected to hamper the bloc’s growth prospects and therefore weigh on the euro.

On another side, the Bank of England sill hold its policy meeting on Thursday and is expected to is expected to announce a fresh increase of at least 100 billion pounds ($126 billion) in its bond-buying firepower to further support the British economy that shrank by a quarter over March and April, especially since little progress has been made on Brexit.

The Bank of Japan and the Swiss National Bank will meet too, on Tuesday and Thursday respectively but are both expected to stand pat. And a barrage of data releases this week will also keep investors busy, most importantly:

 

Monday, June 15, 2020:

• China Industrial Production (YoY) (May) (02:00 GMT)

Tuesday, June 16, 2020:

• RBA Meeting Minutes (01:00 GMT)                                                         
• BoJ Monetary Policy Statement                (04:30 GMT)                                       
• UK Average Earnings Index +Bonus (Apr) (06:00 GMT)
• UK Claimant Count Change (May) (06:00 GMT) 
• BoJ Press Conference (07:00 GMT)                                           
• German ZEW Economic Sentiment (Jun)               (09:00 GMT)
• US Core Retail Sales (MoM) (May) (12:30 GMT)
• US Retail Sales (MoM) (May) (12:30 GMT)

Wednesday, June 17, 2020:

• UK CPI (YoY) (May) (06:00 GMT)
• EU CPI (YoY) (May) (09:00 GMT)
• US Building Permits (May) (12:00 GMT)
• Crude Oil Inventories (14:30 GMT)

Thursday, June 18, 2020:

• Australia Employment Change (May) (01:30 GMT)
• SNB Interest Rate Decision (07:30 GMT)
• SNB Monetary Policy Assessment (07:30 GMT)                                                                   
• SNB Press Conference (08:00 GMT)                                         
• BoE Interest Rate Decision (Jun)               (11:00 GMT)
• BoE MPC Meeting Minute (11:00 GMT)                                                 
• US Initial Jobless Claims (12:30 GMT)
• Philadelphia Fed Manufacturing Index (Jun) (12:30 GMT)

Friday, June 19, 2020:

• Australia Retail Sales (MoM) (01:30 GMT)
• UK Retail Sales (MoM) (May) (06:00 GMT)
• Canada Core Retail Sales (MoM) (Apr) (12:30 GMT)