Investment Bank Outlook 25-06-2021
RBC Capital Markets
Overnight: The Biden administration announced a bipartisan infrastructure deal overnight, but at $579bn over five years it is only a fraction of the bigger multi-trillion plan that is still being crafted. Some reports tag the deal at $973bn, but only $579bn is new spending on top of expected regular transport-related funding. Moreover, it is yet unclear if the bipartisan deal will be able to muster the necessary votes to pass the Senate. Moreover, all the major US banks passed the latest Fed stress tests, which would allow them to start paying dividends and undertaking stock buybacks after June.
Day ahead: The data in focus today are UK CBI retail sales, US personal income & spending (see USD), and US PCE inflation. USD: US household spending is shifting from goods to services. The May personal income and spending report should see services spending increasingly making up for lost ground. On the income side, another sizable decline is expected as fiscal stimulus fades, but beneath the surface wages and salaries are still chugging along nicely. As we already know from the recent CPI report, inflationary pressures continue to build, and we think the PCE deflators will reflect that trend too. CAD: USD/CAD features support at 1.2296 and 1.2252, with resistance at 1.2354 and 1.2403.
Credit Agricole
USD: All eyes on PCE In the US, all eyes will be on the release of May PCE deflator. Our US economist expects it to rise 0.7% MoM in May, matching April’s increase, which would result in the YoY pace jumping to 3.6% from 3.1%. He notes, that this print would leave PCE inflation well above the Fed’s 2% target with further acceleration expected for next month. With our house view being above consensus expectations of around 3.4%, it cannot be excluded that the greenback faces upside risks. At the same time, however, Fed members have been reassuring of late that stronger price growth is likely to prove transitory and so much could still keep the currency in check for now. Having said that, depending on external factors such as risk sentiment remaining firm, we remain in favour of buying the USD against low yielders such as JPY. We stay long the pair as a trade recommendation.
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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.