Market Commentary – June 24, 2020

Kevin Jock

24th June 2020

Second wave concerns, RBNZ rate unchanged & XAUUSD rises

   USD Tuesday saw headlines focused on covid 19 second wave and lockdown concerns, support from the Whitehouse for phase 4 stimulus & more positive economic news. Stocks on Wall Street extended gains on the data and hopes of more fiscal stimulus. USD fell against a basket of currencies. U.S. Treasury priced lower.

     Asian shares cleared a four-month high on Wednesday as investors remained stubbornly upbeat on the outlook for a re-opening of the global economy even as cases of the coronavirus looked to be accelerating to new peaks, Reuters reported.

     The RBNZ unanimously agreed to leave its policy unchanged in June and left OCR unchanged at 0.25%. The Central Bank said they still see downside risks for the economy so they remains open to providing more stimulus “it is not clear yet whether monetary stimulus provided is sufficient to meet its mandate” RBNZ LSAP program expected to be expanded to $90bn by August 2020.

Figure 1 (Source: Refinitiv Eikon): NZDUSD dip on RBNZ announcement

     HUF draws headlines as Hungary’s Central bank MNB cuts base rate by 0.15% to 0.75%. “In order to maintain price stability and support the recovery of economic growth, it has become necessary to fine-tune monetary conditions: to reduce the base rate,” the MNB said in a statement. The Hungarian forint weakened from 308.42 to 309.31 HUF/USD.

     USD/THB has slipped on USD weakness. Thai PM Prayuth Chan-Ocha considers extending Thailand’s state of emergency beyond the current Jun 30 deadline. The BoT is expected to leave the main policy rate unchanged at 0.5%. Revision of GDP and inflation from the BoT will be closely monitored

     Singapore’s PM Lee ask President Halimah Yacob called a snap parliamentary election, SGD sells off. “We need a capable government, with the strong backing of the people, to do all that needs to be done on your behalf, and see us through these tumultuous times,” Singapore PM Lee said earlier. “An election [now] will clear the decks, and give the new government a fresh five-year mandate.” Additional news comes Friday from Singapore’s industrial output data print.

Headliner Review

  • In the spotlight, manufacturing and services PMI. While the loosening of lockdown restrictions echoed a returned to normality, most figures remain within contraction territory:
    • Europe’s two largest economies, Germany and France posted better than expected figures, continuing to bounce back from April lows. French services and manufacturing posting 50.3 and 52.1 from 31.1 and 40.6 respectively, whilst German numbers were announced at 44.6 and 45.8 from 39.4 and 30.5. Overall, pulling the Euro groups figures higher with one of the quickest rise in history, sitting at 46.9 and 47.3. A stark contrast to the past 3 months.
    • International markets followed suit with UK manufacturing and services increase to 50.1 and 47.0 respectively from 40.7 and 29.0
    • Whilst US gains ground with healthy numbers at 49.6 and 46.7.
  • Record low mortgage rates have helped support a relatively resilient housing market within the US as new home sales remain unaffected by the pandemic. As opposed to existing homes, low rates have put new homes within reach of buyers. Recent stats show annualized figures increasing beyond expectations with sales at 676K.
  • RBNZ re-affirms continual commitment in keeping interest rates at current levels for the foreseeable future with cash rates held at historical lows of 0.25% and additional asset purchases beyond the current $6BN scope if the economy deteriorates any further.

Up Next

     Today will be lighter on the scheduled prints. We do however see some activity in the EM space and central bank speeches for both EUR and the USD. NOK employment is due along with SEK confidence figures.We see key central bank announcements from ZAR, THB and CZK.  MYR, ZAR, MXN and RUB CPI figures are due.

Headliners to watch

  • ZAR will be in important to watch today as the Finance Minister Mboweni presents the Treasury’s Supplementary Budget in a mini Budget review.
  • The BoT is expected to leave the main policy rate unchanged at 0.5%.
  • MYR, ZAR, MXN and RUB CPI figures are due
  • ECB Monetary Policy Meeting Accounts will be released today. As per the ECB conference from early month, asset purchases will remain, and further monetary tools considered if necessary
  • Of particular interest is the coming US Bank Stress test results. Generally, test is run on data reflecting bank balance sheets as of December. However, given current extenuating circumstances, the Federal Reserve have extended sensitivity testing to accommodate recent data dating February. Test’s results will reveal how well(ill)-prepared US banks are to unprecedented economic shocks
  • US Core Durable Goods expected to rebound positively to 2.4% from a -7.7% MoM. Failure to meet or exceed expectations may dim current bright spots
  • US Final GDP forecast tomorrow it’s negative quarter in 5 years ( -5% QoQ)
  • Crude Oil inventory expected to stay in positive territory at 1.2M
  • Thursday and Friday are both Chinese Bank Holiday’s for Dragon Boat Festival


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Antony Tan
Ben Li
Kevin Jock