Data releases in the coming week will be scrutinized eagerly for clues on the length and depth of recessions caused by the Covid-19 pandemic, most notably the flash PMI updates for the US, Europe and Japan due on Tuesday.
The week will also see updated forecasts from the IMF, while monetary policy decision is due in New Zealand.
Overview of last week
Markets struggled for direction as fear of a second wave of Covid-19 weighed on sentiment over the last week while US-China relations were back under the spotlight. The Dow Jones was able to recover from the previous week’s selloff, but is still trading within a limited range.
In the currency market, the US dollar was able to recover from its recent drops forcing other pairs to lose ground against it. However, the Australian dollar was the best-performing currency against the dollar while commodity currencies were pushed lower.
Key economic data to watch out for this week
Tuesday, 23rd June – Global Flash manufacturing & services PMI surveys
Thursday, 25-26th June – US GDP and PCE data.
US30Roll Dow Jones Industrial Index
The Dow Jones Index was able to recover from last week`s sell off and was able to gain bullish momentum toward the levels of 26200. However, the initial upside was lost as coronavirus fears regained momentum. The Dow is currently until a breakthrough of 26500.
Last week, the single currency edged higher at the start of last week but reversed for three consecutive daily pullbacks. However, the EUR/USD has managed to regain some buying interest near 1.1200 area on Friday. Investors may keep the cautious note for next week following fresh covid-19 cases in several countries.
Global flash PMI to be eyed
The latest PMI surveys provided an early indication that the worst of the economic impact from the virus outbreak appears to have hit in April, with the global PMI staging a record rise in May, albeit remaining worryingly weak compared to historical standards. With lockdowns around the world largely easing as June began, further gains in the PMIs will be needed to corroborate growing expectations that economic recoveries are gaining traction.
Keep an eye on the Reserve Bank of New Zealand
Analysts will look for signs from policymakers regarding moving the New Zealand interest rate towards negative territory. This could have consequences for central banks across APAC as an increasing number of central banks are tapping into unconventional monetary policies to support their national economy.
Increase in US PCE numbers to be expected
Sharp declines in oil prices and drops in consumer spending placed downward pressure on US inflation during the first stages of the pandemic. The annual change in the PCE Price Index fell to 0.5% in April and, excluding volatile items like food and energy, core PCE price inflation also eased to 1%, as extra and nonessential purchases were kept to a minimum. The steady reopening of the US economy is expected to place upward pressure on prices as demand for goods and services increases.