Morning Report – Wednesday 17th June

Main Headlines

UK inflation fell to its lowest level since June 2016 last month as the coronavirus pandemic sucked demand from the global economy and caused oil prices to tumble, leaving the Bank of England free to ramp up its stimulus programme again.

Risk assets took a breather amid geopolitical tensions and Covid-19’s resurgence. Asian markets traded lower, while S&P 500 futures are slightly negative after a rally on Wall Street that was fuelled by a rebound in retail sales. The won tumbled on North Korea’s recent moves. Treasuries climbed, while the yen and gold ticked higher. Oil slid, with WTI dropping more than 2%.

European car sales showed the first signs of a tepid recovery in May. Passenger vehicle registrations plunged 57% from a year earlier. While that’s the worst May since the European Automobile Manufacturers Association started tracking the data in 1990, it was an improvement over April’s 78% drop.

GBP

The pound gave up gains against the dollar yesterday as the greenback strengthened after the United States reported a record increase in retail sales in May after two straight months of declines.

EUR

Angela Merkel expects the EU to agree on a recovery plan in July. She told lawmakers in a closed-door meeting Germany should be able to receive funds from the plan, an official said. EU leaders will hold a video conference on June 19 to debate the proposal, which would make as much as 500 billion euros in grants and 250 billion euros in concessional loans available to the member states most affected by the pandemic.

USD

The dollar is holding firm against many of its rivals this morning after U.S. retail sales jumped far more than expected. However, Federal Reserve chairman Jerome Powell also doused some of the rosy expectations on yesterday, as he painted a rather bleak picture of the U.S. economy while also cementing market hopes for continued policy support.

Main Economic Data/Central Banks/Government (All Times BST)

7:00 a.m.: U.K. May CPI, RPI, PPI
9:00 a.m.: Italy April industrial orders
10:00 a.m.: Euro-Area May CPI
10:30 a.m.: Germany sells bonds
5:00 p.m.: Russia 1Q GDP