Morning Report – 11th June

Main Headlines

The Fed will continue to purchase bonds and will keep rates at zero for the considerable future. The central bank pledged to maintain asset purchases “at least” at the present pace and projected the benchmark will stay near zero through 2022. Officials forecast the unemployment rate will slip to 9.3% in the final three months of the year from 13.3% in May, and predicted GDP will contract by 6.5% this year before rebounding 5% next year.

“We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates.” – Jerome Powell, Chair of the Federal Reserve

Steve Mnuchin said the U.S. “definitely” needs additional fiscal stimulus, particularly for the retail, travel and leisure industries. “We are going to need another bipartisan legislation to put more money into the economy,” the Treasury secretary told a Senate panel. Meantime, China will be held accountable for failing to warn others about the virus, Mike Pence told Fox. The VP said the U.S. will stand strong on trade until the relationship with China is reset.

Investors fled from risk assets as concern of a second wave of the coronavirus in America added to Fed caution. U.S. stock futures fell with their European peers and Asian markets halted the longest winning streak in three years. Tokyo’s Nikkei 225 fell more than 2% as the yen jumped. Treasuries extended gains and oil slid with most industrial metals.

GBP

The U.K. government made a string of failures in its handling of the pandemic, its top scientists said, putting Boris Johnson on the defensive on live television. Britain must learn its lessons fast before a potential second wave hits, said Chief Medical Officer Chris Whitty. Earlier, medical expert Neil Ferguson said the death toll could’ve been at least halved if action was taken sooner. The PM said it was premature to draw conclusions. Sterling has retreated from recent three month highs as the UK comes back into focus.

EUR

The European Central Bank will do anything possible to ensure that the current crisis is not made worse by a credit crunch, its Chief Economist Philip Lane told Il Sole 24 Ore in an interview published this morning. When asked if any new interest cuts were possible, Lane added that the net asset purchases under the Pandemic Emergency Purchase Programme (PEPP) had proven to be particularly effective in the current state of uncertainty and market stress. The Euro remains well supported following last week’s expansion of the programme.

USD

The dollar bounced against riskier currencies and the safe-haven yen hit a one-month high on Thursday as the U.S. Federal Reserve’s dour economic outlook spooked investors. The moves recouped the greenback’s initial losses after the Fed’s policy stance, projecting rates near zero for years, was welcomed as a sign of its continued support for asset prices.

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

6:30 a.m.: France 1Q payrolls
9:00 a.m.: Italy April industrial production
12:00 p.m.: Ukraine rate decision
1:30 p.m.: U.S. initial jobless claims

Corporate Events

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