General

Week Ahead: How will the PBoC react to new Covid outbreak?

George Walker, Friday, 19 June 2020

MKT-6823_WA-PBoC_blog 

After several chaotic periods, the markets should be quieter this week with fewer-than-normal  macro-data updates. It might be a welcome break after some of the most volatile months we’ve seen, but there are still some good opportunities to trade. The highlight might come early as the People’s Bank of China makes its decision on interest rate amidst strong fears of a fresh outbreak of the coronavirus. The Bank’s actions will be crucial in determining sentiment surrounding the ongoing pandemic, so it’s vital the right decision is made with markets likely to be susceptible to moves.

New outbreak of coronavirus to impact PBoC? 

This week kicks off with an Interest Rate decision from the PBoC in the early hours of Monday morning. The PBoC has been steadily reducing the interest rate since March and with potentially a new outbreak of coronavirus cases in the capital Beijing, they could well do so again with this announcement in order to spur the economy - which in turn could be well received by markets as we head to the European open.

It’s a dangerous time for the Chinese economy in particular at the moment. After what seemed to be like a nationwide recovery from the pandemic, a second wave of the virus could completely cripple the economy once more. Monday’s decision by the PBoC is crucial and policymakers need to ensure rates are not lowered unnecessarily.

Global PMI data

There’s a whole raft of Services and Manufacturing PMI figures released throughout Tuesday from Germany and the eurozone, as well as the UK and the United States. The lockdowns imposed by governments have taken their toll on these developed economies and investors will continue to monitor the level of damage the pandemic has had. Services and Manufacturing PMI data makes up a country's GDP so worse-than-expected numbers could cause uncertainty in markets as investors will want to see economies start to rebound as lockdown measures are eased.

Quiet end to the week

The Reserve Bank of New Zealand will be in focus overnight into Wednesday when it delivers its latest stance on interest rates. The weaker-than-expected Q1 GDP data out last week saw the value of the NZD decline slightly as traders and investors speculate that the RNBZ might need to amend stimulus measures in order to stimulate the economy.

Thursday afternoon will be all about the US economy. High impact inflation data in the form of Durable Goods Orders is released at the same time as Gross Domestic Product and initial jobless claims. Collectively, these figures will give a good overview of the health of the world’s largest economy so traders of USD and US indices could be in for a volatile afternoon pending how these numbers read. We recently saw comments from the Chairman of the Federal Reserve interpreted as they stand ready to do whatever is necessary in order to get the economy going again, investors will however want to see the underlying data start to improve before piling into ‘discounted’ markets too aggressively.

Friday is rounded off with Consumer Price Index inflation data released from Japan overnight as well as Personal Income and spending from the US.

Current trading conditions are volatile and unpredictable however, if you are on the right side of the trade, at the right time, they can be lucrative. Timing, risk controls and awareness of market moving events are key to success so those who can take the time to focus on the markets will hopefully reap the rewards.

All times indicated are BST.


ECONOMIC CALENDAR (all times are BST)

Monday, 22 June

02:30 CNY PBoC Interest Rate Decision
11:00 GBP CBI Industrial Trends Survey
13:30 USD Chicago Fed National Activity Index
15:00 USD Existing Home Sales
15:00 EUR Consumer Confidence

UK Company Announcements:

Marstons
Polymetal International
Premier Foods
Rank
Redrow

US Company Announcements:

Lennar Corporation
Tata Motors Ltd

 

Tuesday, 23 June

00:00 AUD Commonwealth Bank Services PMI
00:00 AUD Commonwealth Bank Manufacturing PMI
00:00 AUD Commonwealth Bank Composite PMI
01:30 JPY Jibun Bank Manufacturing PMI
08:30 GER Markit Manufacturing PMI
08:30 GER Markit Services PMI
08:30 GER Markit PMI Composite
09:00 EUR Markit Manufacturing PMI
09:00 EUR Markit Services PMI
09:00 EUR Markit PMI Composite
09:30 GBP Markit Manufacturing PMI
09:30 GBP Markit Services PMI
13:55 USD Redbook Index
14:45 USD Markit Manufacturing PMI
14:45 USD Markit Services PMI
14:45 USD Markit PMI Composite
15:00 USD Richmond Fed Manufacturing Index
15:00 USD New Homes Sales
21:30 USD API Weekly Crude Oil Stock

UK Company Announcements:

Associated British Foods

Centamin

London Stock Exchange
Segro

US Company Announcements:

Oracle Corporation

Wednesday, 24 June

03:00 NZD RBNZ Interest Rate Decision
03:00 NZD RBNZ Rate Statement
06:00 JPY Coincident Index
06:00 JPY Leading Economic Index
08:00 EUR Non-Monetary Policy ECB Meeting
09:00 GER IFO – Business Climate
09:00 GER IFO – Current Assessment
09:00 GER IFO – Expectations
10:00 CHF ZEW Survey – Expectations
14:00 USD Housing Price Index
14:00 CHF SNB Quarterly Bulletin
15:30 USD EIA Crude Oil Stocks Change
23:45 NZD Imports
23:45 NZD Exports
23:45 NZD Trade Balance

UK Company Announcements:

Boohoo
Fevertree
Antofagasta
CRH
Drax
Hochschild

US Company Announcements:

N/A

Thursday, 25 June

05:30 JPY All Industry Activity Index
07:00 GER Gfk Consumer Confidence Survey
10:00 EUR Services Sentiment
11:00 GBP CBI Distributive Trades Survey – Realised
13:30 USD Initial Jobless Claims
13:30 USD Continuing Jobless Claims
13:30 USD Durable Goods Orders
13:30 USD Durable Goods Orders ex Transportation
13:30 USD Durable Goods Orders ex Defence
13:30 USD Nondefense Capital Goods Orders ex Aircraft
13:30 USD Personal Consumption Expenditures
13:30 USD Core Personal Consumption Expenditures
13:30 USD Gross Domestic Product Index
13:30 USD Gross Domestic Product Annualised
15:30 USD EIA Natural Gas Storage Change
22:00 NZD ANZ – Roy Morgan Consumer Confidence

UK Company Announcements:

Gulf Keystone Petroleum
Unilever
Anglo American
Compass Group
Croda International
Persimmon
Petropavlovsk
Rlex
Taylor Wimpy
Tullow Oil

US Company Announcements:

Kroger Company

Friday, 26 June

00:30 JPY Tokyo Consumer Price Index
00:30 JPY Tokyo CPI ex Fresh Food
00:30 JPY Tokyo CPI ex Food, Energy
12:00 GBP BoE Quarterly Bulletin
13:30 USD Personal Income
13:30 USD Personal Spending
13:30 USD Personal Consumption Expenditures – Price Index
13:30 USD Core Personal Consumption Expenditures – Price Index
15:00 USD Michigan Consumer Sentiment
18:00 USD Baker Hughes US Oil Rig Count

UK Company Announcements:

IG Group Holdings
Pearson

US Company Announcements:

N/A

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