US governors are trying to carefully navigate reopening plans to salvage as many businesses as possible, while several states continue to struggle containing the coronavirus spread.  New York City, once the epicenter of the coronavirus pandemic in the US enters its phase 2 reopening on Monday, with as many as 300,000 employees expected to return to their jobs.  In the UK, PM Boris Johnson will push for an easing of the two-meter social distancing rule if he can get the support from health experts.

The one-way trade of buying risky assets might be over and volatility should remain elevated since the US economic recovery is not accompanied with a stronger rebound in the labor market. Adding to the uncertainty are the current virus resurgence concerns, what to expect in the fall, end of month volatility from the rebalancing of the S&P and Russell indexes, and a wrath of geopolitical risks.

Right now, the Fed has the greenlight to keep deficits on an unsustainable path, but that will only become an issue once the economy improves.  It is amazing how irrational the risk-on rally has been for global equities as the US sees the virus continues its spread across the country and as a second wave hits Beijing, and concerns of a resurgence could trigger more restrictions and cripple consumer confidence.  Financial markets are also constantly fluctuating over every vaccine/treatment update.  The base case remains that a vaccine will be found this year, with high hopes on a few that will have phase 3 vaccine trials starting this summer.

US Politics

Presidential Trump is resuming campaign rallies while the coronavirus pandemic continues to intensify across several states and while protests against police brutality continue.  Public health officials remain skeptical of any mass gatherings and are very nervous over the June 20th rally at the BOK center in Tulsa, Oklahoma, an arena that could hold up to 20,000 people.  President Trump is likely to remain on the attack against China, but Wall Street doubts he will follow through on any of his threats given the vulnerable state of the economy.

Democrats are eagerly awaiting former-VP Biden’s decision on his running mate.  Prior to COVID-19, the Democratic National Convention was originally scheduled in July, meaning we should have found out his decision by June.  Since the convention was delayed till August 17th, he will have more time to evaluate his candidates.  Biden will turn 78 a few weeks after the election, so his VP selection will be critical for many voters.


With the UK economy continuing to feel the devastating effects of the coronavirus pandemic and lockdown that it forced, the Bank of England expanded its asset purchase facility this week by another £100 billion, taking the total to £745 billion. The additional purchases should see it through to the end of the year, with the pace being allowed to slow due to the economic prospects improving since the May inflation report. The country is still in the midst of a severe recession and unemployment will soar as the furlough scheme draws to a close but the Bank is less pessimistic than it was.


Brexit negotiations are going to intensify between now and the end of July in the hope that significant progress can be made on some of the more contentious issues, with the end of year deadline fast approaching. An extension was once again ruled out after a discussion between Boris Johnson and Ursula von der Leyen earlier this week.

European Union

Leaders will discuss the draft 2021-27 budget for the first time on Friday but no breakthrough is expected, with the “frugal four” still strongly against the inclusion of grants, rather believing that the recovery fund – which will be raised in the market by the European Commission – should be repaid in full. The current proposition from the EC includes €500 billion of grants and €250 billion of loans, on top of the €1.1 trillion budget. The hope is that discussions lay the groundwork for a deal before the summer recess in August.


The SNB left interest rates unchanged this week and vowed to maintain ultra loose monetary policy and currency interventions for some time, with inflation not expected to return until 2022, and then by only 0.2%. It expects the country to shrink by 6% this year. The central bank has no limit on currency interventions or explicit target levels.


The CBRT has been on an interest rate cutting cycle since last July, with rates falling from 24% to 8.25%. Only a 25 basis point rate cut is expected at this meeting.   The cuts have naturally been getting much smaller and the weakness in the currency may act as a deterrent, but that hasn’t held them back before. If there is a cut, it seems unlikely that it would exceed the 50 basis points at the previous meeting.


China is embroiled in multiple diplomatic conflicts at the moment, from US/China trade, Hong kong’s security law to the standoff with India in the Himalayas. Any of these could quickly escalate and have negative repercussions across markets around the world.

Monday China announces its one and five-year loan prime rate decisions. Expected unchanged but a surprise cut could boost markets across the region.

No other significant data this week.

Hong Kong

The new security law provisions will be announced shortly and look set to be rammed through the legislature in double quick time. High chance of rapidly increasing protests disrupting the economy and markets in Hong Kong.


Economy continues reopening but Covid-19 cases are spiking, markets negative. Standoff with China continues in the Himalayas but negotiations continue. However the situation is tense and could escalate rapidly. No significant data.


Australian Dollar remains under pressure as bull-market correction continues. High potential for more downside. Australia stocks and currency high vulnerability to sudden downside shift in sentiment as a proxy for global risk

No significant data.


Tuesday PMI expected to confirm Japan remains in recession. No other tier-1 data. Japanese Yen looks set to strengthen further on risk aversion flows. Geopolitical events elsewhere could rapidly accelerate that move.



Oil prices rose after US economic data showed large parts of the economy are bouncing back strongly and after the OPEC+ group’s JMMC meeting saw Iraq and Kazakhstan deliver their strategies for bringing their production down to their quotas.  It seems OPEC+ might actually deliver with their biggest ever production cuts as most of the cheaters seem on board.  Nigeria, Angola, and Congo have yet to deliver reduction plans, but that might not matter if the larger producers seem committed.

WTI crude remains elevated but unlikely to break much past the $40 level as surging coronavirus cases across Texas, Florida and several other states raise the risk that reopening momentum will hit stall speed very soon.  Beijing seems they may have their second wave of the virus under control, but that does not seem like it will be the case for the US later in the summer or early Fall.  Global oil demand is recovering quickly but that seems like it might be poised to hit a few bumps as reopenings lose momentum as virus risks remain significant.


Gold prices continue to consolidate regardless of negative coronavirus headlines and more stimulus being pumped into the global economy.  Despite all the other positive economic releases, the recovery will not boost risky assets unless the Americans are quickly coming back to work.  Gold is in a tricky place but will ultimately see further support if the labor situation remains weak.  The stronger dollar theme will likely be short-lived, and gold should eventually make another attempt at $1750 in the short-term. The virus situation in the US should also provide steady demand for safe-havens such as Treasuries and gold.  Texas saw hospitalizations rise for a record seventh consecutive day, Florida had its largest increase with new cases, while California had their largest single-day increase with infections.


Bitcoin continues to consolidate in what many crypto-fans are calling the typical accumulation phase that occurs after a halving event.  Bitcoin has struggled despite an overall resilient appetite for risky assets.  The world’s largest cryptocurrency has started to see some traders focus more so on Ether’s network as demand grows for decentralized finance (DeFi) applications.  Bitcoin may struggle as their rival continues to gain momentum.

Key Economic Releases and Events

Sunday, June 21st

11:00pm NZD May Credit Card Spending M/M: No est v -41.3% prior

Monday, June 22nd

10:00am EUR Eurozone June Advance Consumer Confidence: No est v -18.8 prior

10:00am USD May Existing Home Sales: 4.13Me v 4.33M prior

7:00pm AUD Australia Jun prelim CBA Manufacturing PMI: No est v 44.0 prior

8:30pm JPY Japan Jun Prelim Manufacturing PMII: No est v 38.4 prior

Tuesday, June 23rd

3:15am EUR France Jun Prelim Manufacturing PMI: 47.0e v 40.6prior

3:30am EUR Germany Jun Prelim Manufacturing PMI: 42.5e v 36.6 prior

4:00am EUR Eurozone Jun Prelim Manufacturing PMI:43.0e v 39.4 prior

4:30am GBP UK Jun Prelim Manufacturing PMI:45.5e v 40.7 prior

10:00am USD Jun Prelim Markit Manufacturing PMI: 47.8e v 39.8 prior

10:00am USD May New Home Sales: 630Ke v 623K prior

10:00am USD Jun Richmond Fed Manufacturing Index: No est v -27 prior

10:00pm New Zealand Central Bank (RBNZ) Interest Rate Decision: To keep rates unchanged

 Wednesday, June 24th

CNY Chinese banks observe Dragon Boat Festival

4:00am EUR Jun Germany IFO Business Climate: e v 79.5 prior

Thursday, June 25th

CNY Chinese banks observe Dragon Boat Festival

8:30am USD US May Prelim Durable Goods Orders: 11.2%e v -17.7% prior

8:30am USD US Q3 Final GDP Q/Q: -5.0%e v -5.0% prelim

8:30am USD Weekly Jobless Claims

Friday, June 26th

Russell reconstitution could deliver one of highest-volume stock-trading days of the year

8:30am USD May Personal Income: -5.8%e v 10.5% prior; Personal Spending: 8.7%e v -13.6% prior

10:00am USD University of Michigan Sentiment: 78.9e v 78.9 prelim



By Ed Moya