In our fourth installment of the Investment Bank Outlook 08-19-19, we're going to bring you a selection of perspectives from leading investment banks to outline the key issues and directional views for the week ahead. These excerpts, taken from research notes, will cover issues such as key market themes, economic releases, as well as any major trends and levels to watch. Please note, this material, which does not reflect the opinions of Tickmill, is provided for educational purposes only and should not be taken as an investment recommendation.
RBC
Day/week ahead: It is a quiet day ahead though the week gets busy. UK PM Johnson heads to Berlin for talks with Merkel, followed by Paris & Macron ahead of the endweek G7 summit in Biarritz. If Johnson is going to perform any kind of U‐turn on his negotiating stance, this week would be the one to lay the groundwork for it, though it seems unlikely. All eyes are on Powell at Jackson Hole. Fed Chairman Powell is set to speak on Friday on monetary policy challenges at Jackson Hole. Given the events of recent weeks and with the markets now pricing in a 40% probability of a 50bp cut in the Fed funds target in September, a revision of the general talking points is probably warranted. While the policy papers at Jackson Hole typically stay beneath the radar, multiple media interviews with many Fed members in and around the event should garner loads of attention for obvious reasons.
Our US economists expect an exercise in hand‐holding the market akin to what we witnessed in December. This would likely include: 1) setting the stage for, at minimum, a 25bps cut at the September confab; 2) stressing that Quantitative Tightening is over (for those who missed it); and 3) stressing that the committee
Danske Bank
FX markets
EUR/USD declined last week and ended the week below the 1.11 mark - and we see no obvious triggers for a rebound near term. Preliminary PMIs this week will probably only have limited impact and ECB and FOMC minutes are not likely to put their mark on the market for long. First, we think the current ECB pricing, the likely ‘tiered ECB cut’, is too aggressive. Second, although our new Fed call suggests five more cuts (slightly more aggressive than market pricing), the Fed looks unlikely to accommodate the market’s call for larger rate cuts and we will likely need to get deeper into the easing cycle before we see a more broad-based USD weakness. Meanwhile, speculation over whether the Trump administration could look to FX intervention remains after the recent labelling of China as a currency manipulator: China has said it will not use the CNY as a tool in the trade war, and given further Fed easing down the road, we do not see any arguments for the US to officially abandon the strong dollar policy at this stage. USD/JPY and EUR/CHF have settled at their newfound lows but we would not rule out further drops as the global
economic cycle will likely take another turn lower near term. EUR/GBP has come off its post-Johnson highs but it is, in our view, too early for a firm rebound in the GBP; until we get closer to the 31 October Brexit deadline, the market is unlikely to get its hopes up too high for an extension to avert a ‘no deal’.
In the Scandies, global risk sentiment is likely to remain in the driver’s seat. Last week’s Norges Bank meeting was no game changer for the NOK as the hiking bias remained amid rising worries over the global picture. This week’s oil investment surveywill probably confirm that the sector is set to continue to boost the economy this year and next – but it is unlikely to prove a turning point for the battered NOK that much in the
current fragile global environment. We keep a neutral view on EUR/NOK for now. For the SEK, we believe it is only a matter of time before the Riksbank decides to postpone the next hike well into next year - a shift it could make already at the September meeting. However, in light of the already relatively soft pricing on the Riksbank, which in our view is justified, such a decision may not lead to any significant rally in EUR/SEK.
Citi
A relatively quiet start to the week as the market waits for bigger events such as central bank minutes, the Jackson Hole symposium and the G7 Summit at the end of the week.
Equity markets are on a better footing today as they are all in the green. USDCNH and USDJPY are both within Friday's ranges.
There are reports circulating that Huawei may gain extensions that permits it to buy US supplies as the 90 days reprieve, from May, ends today. However we are not sure this will be the case as no official detail has been released, though something should be expected.
There are no major data releases ahead today.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.