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Global Market Update
The View from Australia

Craig Killaby June 28, 2020

Data/Speakers

 

> JP June Tokyo Core CPI : 0.2% v. 0.2% exp.

> EU May German Import Prices : 0.3% v. 0.5% exp.

> US May Core PCE Price Index : 0.1% v. 0.0% exp.

> US May Personal Spending : 8.2% v. 8.9% exp.

> US May Revised UoM Consumer Sentiment : 78.1 v. 79.1 exp.

> US May Revised UoM Inflation Expectations : 3.0% v. 3.0% prev.

 

Weekend Headlines (BBG)

 

> Confirmed coronavirus cases worldwide surpassed 10 million, with deaths approaching 500,000

> The European Union moves toward urging travel ban on U.S. and entry to China

> Victoria’s COVID-19 outbreak continues, with 49 new cases Sunday localised lockdowns are likely in hot spots

 

What you need to know

 

A general risk off mood gripped financial markets as world faces the reality of what looks very much like a second wave of COVID-19 infections. The local story around Victoria’s increasing case count didn’t get any better over the weekend, with both Saturday and Sunday’s case numbers coming in above 40 and prompting policymakers to think about re-imposing some lockdowns to curb the spread. Local markets shrugged off any news on Friday, with the AUD trading sideways around the 0.6900 handle amidst very little news flow and lighter volumes with China off on holiday. Over in Europe, the infection rate dropped in Germany adding a bit of positive risk flows while the GBP was under heavy selling pressure as questions arose around the size of the QE program to come for the UK as the economy slowly starts to reopen. In the US, it is all about the significant increase in COVID-19 cases as Texas, Florida and Arizona all post massive gains in cases. Florida and Texas walked back their re-opening plans and closed bars/restaurants as they continue to have record cases. The US had its highest ever case count over the weekend, showing just how much this virus has spread through the population and bringing the economic reopening forecasts right back into question. US equity markets felt the brunt of the negative news, with the S&P500 having a down week and closing down 2.4% on Friday. The Dollar remains in favour as haven flows remained the theme on the second wave, with the JPY and CHF both surging on the session. Gold the winner in commodities, up 0.4% while WTI crude was the laggard down 1.6% as demand fears resurface on the virus surge.

 

The Day Ahead

 

Data

 

> JP May Retail Sales : -11.6% exp.

> EU June German Prelim CPI : 0.3% exp.

> EU June Spanish Flash CPI : -0.9% exp.

> UK Bank of England Gov. Bailey to speak

> US May Pending Home Sales : 18.9% exp.

 

As we edge to the end of the month and quarter, expecting a choppy session today as China comes back after their holiday last week. The week will be light in terms of local data, with RBA Ast. Gov. Debelle due to speak tomorrow combined with PMIs from China as the local highlight.

 

Public holidays from Canada and the US will both impact the usual flows, with Thursday printing the US Non-Farm Payrolls as the US observes their independence day. Watching the numbers from VIC today and the CNY fix with the lack of tier one data on the docket. Month/Quarter end flows make it difficult to predict direction, however the mood seems to be sour to kick off the week as equity markets look very heavy on the open.

 

Range for the day : 0.6790 – 0.6890

 

AUD/USD Technicals

 

The bears are back, as the pair looks heavy below the 0.6900 handle to kick off the week. A break of the intraday low of 0.6841 from Friday is first up with 0.6805/00 the key on a possible text of 0.6770. Resistance seen at the YTD high of 0.7063 however markets would likely need a swift change in COVID-19 sentiment to test the upper levels.