Week Ahead: BoE, BoJ meetings; data to crush quick Covid recovery hopes

Week Ahead

Last week the Federal Open Market Committee effectively killed hopes that the global economy could rebound quickly from the Covid-19 pandemic. Much of the data due this week is expected to deteriorate further. Any bright spots could be overshadowed by growing fears we may be facing a second wave of infections.

The Bank of England and Bank of Japan both hold policy meetings this week. Expect more signals that stimulus is here to stay for a long time.

Make sure you’re prepared for the coming week – read our full breakdown of the key events and data that markets will be watching.

China industrial production to accelerate, retail sales decline to slow

China is still the bellwether for the global recovery, with markets watching the data closely to see how quickly an economy can rebound from lockdown. Industrial production returned to growth on an annualised basis in April after three months of contraction. Forecasts for May suggest growth accelerated to 5%.

Retail sales are expected to continue to contract, although the rate of decline has moderated sharply since the -20.5% drops recorded in January and February. April saw a drop of -7.5% and the decline is expected to have slowed to -2% in May.

Bank of Japan to set out timeline for low rates

Last week the US FOMC stated that interest rates would remain near zero until 2022. This could prompt a similar move by the Bank of Japan, which will look to curb yen strength on the flight to safety caused by the FOMC’s gloomy economic predictions. The BOJ may therefore decide to give its own timeframe for keeping rates at their current, or lower, levels.

Fading hopes of V-shaped recovery to drag ZEW sentiment lower

German and Eurozone economic sentiment has climbed since April, but forecasts suggest the latest readings could see investor confidence pull back again. Assessment of the current conditions is in dire territory anyway, but the overall numbers were pulled up by improving expectations for a swift recovery – something that is becoming increasingly unlikely.

UK, Canada inflation – price growth to remain under pressure

Lockdowns and collapsing oil prices have exerted heavy pressure on consumer prices. Inflation data this week from the UK and Canada is expected to show further weakness. The UK’s core inflation rate was just 0.1% in April. Forecasts for Canada’s data expect a drop of -0.2% on the month, after the -0.7% recorded in May.

Retails sales decline to worsen for UK, Canada – US looking brighter?

Retail sales figures for the UK and Canada this week are expected to post more huge drops, with consumers still restrained by lockdown measures and business closures. Those businesses that are able to reopen have seen trade affected by the strict social distancing measures.

The UK, Canada, and the US all saw retail sales drop by the most on record in April. In the case of the UK and Canada things are expected to have gotten even worse in May.

However, in the case of the US data, recent figures from Mastercard suggest that the decline in retail sales may have softened notably in May. Sales fell -16.4% in April, but Mastercard says it saw a much smaller decline in transaction volumes last month.

New Zealand growth data: calm before the storm

New Zealand prime minister Jacinda Ardern was able to declare last week that Covid-19 had been eradicated in the country and that things could go back to normal.

However, the economic hit caused by the government’s actions to combat the virus will be severe. The OECD predicts a -8.9% drop in GDP this year, with the economy not returning to pre-Covid levels until the end of 2021.

This week’s GDP data is for the first quarter, and a drop of just -0.4% is expected. But as we already know, it’s the second quarter reading that really matters.

Australia jobless rate to keep climbing

Data this week is expected to show another 200,000 jobs were lost last month, on top of the nearly 600,000 in April. The unemployment rate jumped a whole percentage point to 6.2% in April, although this was well below market expectations of a surge to 8.3%.

The jobless rate is predicted to climb to 6.9%, although the true rate is likely much higher, considering how many Australians are currently relying on the government to pay their wages.

Bank of England to expand QE

The Bank of England is expected to expand its quantitative easing programme this week, with estimates for the increase ranging from £70 billion to £200 billion.

Negative rates are sure to get a mention, but policymakers are approaching the issue cautiously. While governor Andrew Bailey has recently softened his opposition to such a tool, he has only gone as far as saying that it would be “foolish” to rule them out. BoE chief economist Andy Haldane said at the end of May that, while the MPC was exploring the idea of negative rates, it was very much in the review phase and a decision on the matter was not close.

Kroger earnings

Kroger is expected to report earnings growth of 23.6% year-on-year when it releases quarterly earnings on June 18th. EPS is predicted at $0.89, while net sales are expected to have increased 7.7% year-on-year to $40.12 billion.

Kroger stock has weathered the Covid-19 pandemic well, having swiftly rebounded from the March sell-off, and is now trading up around 12% for the year. Our Analyst Recommendations tool shows it has a consensus “Buy” rating. Hedge funds bought 20 million shares in the last quarter.

Highlights on XRay this Week 

Read the full schedule of financial market analysis and training.

07.15 UTC Daily European Morning Call
09.30 UTC 17-June FXTrademark Course – Moving the Odds
11.00 UTC 17-June Introduction to Currency Trading: Is it For Me?
11.30 UTC 18-June Trading with the Killswitch Approach
10.00 UTC 19-June Supply & Demand – Approach to Trading

 

Key Events this Week

Watch out for the biggest events on the economic calendar this week:

02.00 UTC 15/06/2020 China Industrial Production / Retail Sales
01.30 UTC 16/06/2020 RBA Monetary Policy Meeting Minutes
03.00 UTC 16/06/2020 Bank of Japan Rate Decision
09.00 UTC 16/06/2020 German/EZ ZEW Economic Sentiment
12.30 UTC 16/06/2020 US Retail Sales
06.00 UTC 17/06/2020 UK Inflation Rate
12.30 UTC 17/06/2020 Canada Inflation Rate
14.30 UTC 17/06/2020 US EIA Crude Oil Inventories
12.45 UTC 17/06/2020 New Zealand Quarterly GDP
01.30 UTC 18/06/2020 Australia Employment Change / Unemployment Rate
Pre-Market 18/06/2020 Kroger (Q1) – Pre-Market
11.00 UTC 18/06/2020 Bank of England Rate Decision
12.30 UTC 18/06/2020 US Weekly Jobless Claims
14.30 UTC 18/06/2020 US EIA Natural Gas Storage
06.00 UTC 19/06/2020 UK Retail Sales
12.30 UTC 19/06/2020 Canada Retail Sales