Macroeconomics: The Day Ahead for 22 June

  • Another quiet day for statistics, digesting UK PSNB, awaiting CBI Industrial Trends, US Existing Home Sales, Richmond and Philly Fed surveys; Powell, Lane & Schnabel top central bank speaker run; Hungary rate decision; Dutch 16-yr and US 2-yr

  • CEE: Hungary’s MNB expected to go into pole position on policy tightening, Czech CNB not far behind; Poland NBP set to lag peers

  • US Existing Home Sales: fourth consecutive drop seen, as low stocks and affordability pose headwind; absolute level still at pre-pandemic post GFC peak

  • Markets still focussed on financial repression prospects, see no incentive pre-empt Fed, ECB; but volatility likely to be more frequent, even if transient at the moment

EVENTS PREVIEW

It will be another day where the data run is unlikely to be little more than a passing distraction, with the UK PSNB and CBI Industrial Trends survey, US Existing Home Sales, Philly Fed (services) and Richmond Fed surveys and provisional Eurozone Consumer Confidence the only items of any note. Fed and ECB speakers are again plentiful, with Powell testifying on the Covid Crisis to the Senate sub-committee, while Lane and Schnabel feature for the ECB. It may however be Hungary that steals the show as it moves to the front of the group of non-Eurozone European countries looking to wind back on pandemic related monetary accommodation, with the MNB seen hiking its repo rate by 30 bps to 0.90%, while keeping its deposit rate unchanged at -0.05%. Tomorrow also sees Czechia’s CNB policy meeting with a 25 bps rate hike to 0.50% expected, while Norges Bank last week signalled a rate hike in September. Poland’s NBP is also under some pressure to hike, though moves by governor Lapinski to quell or rather silence a dissenting minority calling for a rate hike as inflation remains stubbornly above target, suggest that it is in not hurry to hike rates, though it may eventually find its hand forced, particularly if other CEE central banks continue to tighten policy. As with Canada’s BoC move to be out of step with other G7 central banks, divergent policy paths will likely create some additional FX volatility. Overall, markets have once again demonstrated that for all the (overhyped) talk of a “shock” Fed shift, the reality of financial repression being here to stay, even if and when central banks tighten policy remains front and centre, above all given a clear resistance to pre-empting policy moves, both given an array of uncertainties and the still dominant FOMO narrative, even if this will probably be atrophied as and when liquidity does start to be withdrawn. It does suggest that recent volatility will become a more prevalent phenomenon, above all given increasing reactive sensitivity to central bank headlines.

U.S.A. – May Existing Home Sales

A further modest drop of 2.4% m/m to a 5.71 Mln SAAR pace is expected, with low inventories (despite last month rebound to 1.15 months of supply), rising prices and the reported 4.4% m/m drop in Pending Home Sales. That said, the projected pace would still be the same level as in February 2020, which was a 13-yr high. The focus will likely be as much on the report’s price measure, given that the Q1 pace was 16.2% y/y, in turn a reminder that while mortgage rates remain low, and stocks low, affordability is increasingly the biggest headwind.

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Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

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