This Week's Five Notable Materials! "Highlights and Event Schedule for the Week of May 18"

 

Last week major currencies and major stock indices remained in a range-bound, consolidating phase.

 

The coronavirus is moving toward convergence, and in Europe, the UK, and the United States, actions toward resuming economic activity have started.

In Japan as well, with some exceptions, the state of emergency has been lifted and regulatory easing is moving forward.

 

However, what concerns us is the second wave.

During the Spanish flu, there were second and third waves as well.

 

In Korea after easing restrictions, clusters formed in clubs, and information suggests that China has reported the infection spreading leading to the sealing off of some northern cities in Jilin Province.

In Europe and the UK, there are reports that infections, which had been contained due to easing restrictions, are expanding again.

In Russia, despite the rapid spread of infection, information suggests that lockdowns are being lifted and economic activity is resuming, which raises concerns about a second wave of the coronavirus pandemic and related news.

 

 

◎ This Week's Points of Focus

 

1) Key Officials' Statements

 

This week features many important remarks from key figures.

 

Federal Reserve officials deny it, but whispers of a negative interest rate policy are rising, increasing market expectations.

As with last year's rate cuts, even if the Fed denies it, bond markets will price in lower rates, and as a result the Fed may end up cutting rates.

Current rates are also pricing in negative rates, continuing to fall.

This week, with many Fed officials including the Chair scheduled to speak, there is attention on whether remarks about negative rates will appear and how rates will move in response to those statements.

 

In the UK, additional easing measures, zero interest rates, and even negative rates are rumored.

At the recent monetary policy meeting, two members voted for additional quantitative easing.

It was rejected by a vote of 7 to 2, so there was no additional QE, but market attention remains on future monetary policy and whether further easing will occur this week.

 

In Europe, there is ongoing tension between Germany and the ECB over monetary policy.

Both Europe and Germany remain at a standstill, with ongoing key official statements.

From these remarks, immediate action is unlikely, but Germany’s potential exit from ECB easing policy cannot be ruled out, so all eyes are on this.

 

 

 

2) Manufacturing/Services/Composite PMI

 

This week the flash PMIs for the US, UK, and Europe will be released for manufacturing, services, and composite indices.

PMIs are released in flash and revised forms twice; the flash figure is especially in focus.

 

Flash figures are highly timely, but they are more prone to deviations from forecasts, which makes them a point of significant movement.

Given the two aspects of flash and actual results, the PMIs tend to be a focal point for market moves.

Recently, given the pandemic’s impact, the actual economic conditions have been priced in, and attention is shifting to future economic outlooks.

PMIs are indicators of future business sentiment; with high attention, they are likely to be a point where markets move.

 

 

 

3) Turkish Policy Rates

 

Turkey’s lira has continued to weaken, raising concerns about a renewed lira shock, and with policy rate announcements scheduled, attention is high.

President Erdogan has pressed for rate cuts to spur economic recovery.

As a result, the policy rate, which was 24% last year, has fallen to 8.75.

 

However, given the extent of lira depreciation, there is speculation that the central bank would raise rates to defense the currency, and expectations are that rates might rise this time, though Erdogan continues to pressure for cuts. The contest between Erdogan and the central bank, which wants to raise to defend the currency, is a focal point.

Also, after the policy rate decision, whether the lira will weaken further, crash, or a currency crisis might occur, is of interest.

 

 

 

4) US-China Relations

 

Last week, U.S.-China relations escalated from exchanging responsibility for the virus to statements directly affecting the economy.

President Trump has extended sanctions on Huawei for another year and has hinted at a possible severance with China.

China has warned that it will not purchase agricultural products unless a friendly atmosphere is created with the United States.

 

If such situations actually occur, the Phase 1 US-China agreement signed in January could fail to be fulfilled, potentially leading to a resumption of US-China tensions.

This week, attention is on remarks by President Trump and Chinese officials, and whether risk-off behavior will occur.

 

 

 

5) Europe and the UK

 

In Europe, the German and ECB standoff remains at a stalemate.

It is expected to continue for the time being, but Germany’s exit from easing policy remains a possibility.

Uncertainty about ECB easing policy is likely to persist.

 

Additionally, negotiations on a post-Brexit Free Trade Agreement between the UK and the EU continue, but progress appears limited.

Europe is expressing concern over the negotiations, while the UK is more optimistic, according to statements.

The deadline for delaying the FTA negotiations has been set for June 30, so headlines and statements related to FTA negotiations are in focus as the deadline approaches.

 

 

 

 

◎ This Week’s Economic Event Schedule

 

 

May 18 (Monday)

 

Eurozone Finance Ministers’ Meeting

 

08:50 JPY Japan Q1 2020 GDP

19:00 EUR DeCos—Spain’s central bank president speaks

 

 

May 19 (Tuesday)

 

00:00 GBP Tenreiro External BOE Director speaks

10:30 AUDRBA Minutes

15:00 GBPUK Employment/Unemployment Rate/Average Earnings

18:00 EUR Germany ZEW Economic Sentiment Index

18:00 EUR Euro-area ZEW Economic Sentiment Index

21:30 USD US Building Permits

23:00 EURLane ECB Executive Board Member speaks

23:00 USD Kashkari Minneapolis Fed President speaks

23:00 USDPowell FOMC Chair and Mnuchin Treasury Secretary testimony (Senate)

 

 

May 20 (Wednesday)

 

15:00 GBPUK CPI

21:30 CADCanada CPI

22:30 GBPBailey BoE Governor, Broadbent BoE Deputy, and Cunliffe BoE Deputy speeches

23:00 EUR Euro-area Consumer Confidence Index (flash)

23:30 USD Crude oil inventory

 

 

 

03:00 USDFOMC Minutes

08:50 JPY Japan April Trade Balance

17:30 GBPUK Manufacturing/Services/Composite PMI (flash)

20:00 TRYTurkey Policy Rate Announcement

21:30 USD US Initial Jobless Claims and Philadelphia Fed Manufacturing Index

22:45 USDUS Manufacturing/Services/Composite PMI (flash)

23:00 USD US Existing Home Sales

23:00 USDWilliams, New York Fed President speaks

 

 

May 22 (Friday)

 

China National People’s Congress opens

 

02:00 USDLael Brainard Fed Governor speaks

03:30 USDPowell FOMC Chair speaks

08:30 JPY Japan April CPI

15:00 GBP UK Retail Sales

16:15 EURFrance Manufacturing/Services/Composite PMI (flash)

16:30 EURGermany Manufacturing/Services/Composite PMI (flash)

17:00 EUREuro-area Manufacturing/Services/Composite PMI (flash)

20:30 EURECB Governing Council Minutes

21:30 CAD Canada Retail Sales

 

 

May 23 (Saturday)

 

02:00 USD Baker Hughes Rig Count

 

 

 

 

 

 

 

 

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