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June 16, 2020

June 2020 Financial Outlook

By Thomas  Kareklas | VP Sales

Out of Darkness

The past few months have been like a Sci Fi movie, but June looks like the month that many countries are starting to see easing in Coronavirus restrictions.

During any given month there are a number of high impact events that Brokers and Traders can engage in, in order to strategize trades. These conversations are important to both – for traders looking to engage the markets in a more insightful way and to Brokers to build long term relations with their traders.

Since the COVID-19 pandemic, we have seen that all news has massive impacts and that all markets have been high volatility as the world economies are thrown into turmoil. Now more than ever, we look for guidance from major announcements by banks and governments. The first half of June already saw a raft of major announcements including: Interest Rate decisions from Europe, Canada and Australia; oil announcements from OPEC and the United States; Employment / Unemployment rates from the United States and Europe; GDP from Japan and Europe. 

There was a general expectancy for declines in Employment rates, GDP and Oil demand, but some were not as bad as expected. The US has been the most negatively affected so far causing weakness in the US Dollar and big losses on the stock markets. 

Based on the first half of the month, small deviations from expected announcements may have major implications for the markets – so it is vital to mark events and be prepared with action plans for results if they are better, worse or as expected.

Week of June 15

The biggest event of the week is the meeting of the Bank of England on Thursday, June 18. During the day there will be a number of announcements including decisions on interest rates. It is expected that the Bank will continue to protect the fragile economy with low interest rates and help slow down or avert a major recession, especially with Brexit negotiations yet to be finalized. The day before, June 17, the year on year CPI index for the UK and EU will be released and may offer some indications of what is to follow.

Also during this week there will be announcements from The Swiss National bank and The Bank of Japan, including interest rates decisions,  plus jobless claims in the US.

Week of June 22

Compared to the previous week, it is a much quieter one. It kicks off with an interest rate decision by the Royal Bank of New Zealand on Tuesday, June 23,  which could have knock on effects for the Minors. 

The biggest event is on Thursday, June 25th with the US releasing both year on year GDP results and Core Durable Good Orders – both will indicate the extent to which Coronavirus has impacted the economy and the ability to bounce back. We should expect immediate impacts on the US Dollar, Stock Markets, Commodities, and Gold. For GDP in particular, we are looking for any deviation from the expected 5% decline.

Note that China and Hong Kong are both closed on June 25 for a public holiday.

Last Week of June

As far as the remainder of June is concerned, basically Monday and Tuesday are packed with high impact events to watch and plan for.

On Monday, June 29, two influential announcements will be made. Firstly, Great Britain will release it’s quarter on quarter GDP. It need not be said that this is exactly the quarter with the highest impact on the economy during the COVID-19 pandemic and the UK lockdowns, where a 2% decline is expected, and any deviation from this will have impacts on GPB, UK Stocks and Markets. 

The Harmonized Price Index for Europe will also be released on Monday, ahead of the EU year on year Consumer Price Index announcement on Tuesday, June 30th. 

Overnight on Tuesday, look out for the Chinese PMI announcement – this will be a good indication on how Chinese Manufacturing is coming out of the pandemic. It can also be seen as an indicator of global demand.

Looking Ahead

Many economies are lifting lockdown restrictions and re-opening businesses during June. The return of sports including European Football Leagues and overall lockdown easing may have an initial feel good factor that may lead to short term gains for currencies, stocks and markets, however, these could be short lived. 

Most personal and business Government stimuli are also coming to an end. Add to this that mortgages and loans that were frozen during the heights of the lockdowns will now become due over the summer months; both having significant effects on disposable incomes and spending going forward.

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