Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Take Five: Aussie rates, Fed minutes and summer unknowns

Economy Jul 02, 2021 04:55AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: People are seen on Wall St. outside the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2021. REUTERS/Brendan McDermid/File Photo
 
LOW
+2.38%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

LONDON (Reuters) - Following are five big themes likely to dominate thinking of investors and traders in the coming week.

1/FORWARD THINKING

With markets into the second half of 2021, can the fast and furious run of the last 15 months keep going?

H1 saw some spectacular action: Oil soared 45%, one 'meme' stock loved by amateur traders rose more than 2,500%, Brazil's currency went from zero to hero. But all that stimulus money also means U.S. inflation now annualises at 8% versus an average of just 3% over the last 100 years.

As Donald Rumsfeld, who died on Tuesday, said about something completely different: There are many known unknowns. COVID-19 is one, but BofA reckons only a market crash would now stop the Fed reining in stimulus before year-end.

Considering how much markets love cheap money, Q3 may be a bumpy ride.

Global markets in 2021 https://fingfx.thomsonreuters.com/gfx/mkt/dgkvlrxebvb/Pasted%20image%201624980375516.png

2/ LOWE FOR LONGER

Tuesday's Reserve Bank of Australia meeting is shaping up as a blockbuster. The fate of the RBA's three-year yield target and bond buying scheme will be decided, the language on the rates outlook potentially altered.

    At least one hint is implicit: Either the RBA rolls over the yield target set at the cash-rate level of 0.1% from the April to November 2024 bond lines, which signals steady rates until then - or it doesn't, opening the door for a move sooner.

Anticipating a rates liftoff in 2022, investors will watch Governor Philip Lowe's (NYSE:LOW) unusual post-meeting news conference. The U.S. Fed has become more hawkish, perhaps it's time for the hitherto dovish RBA to follow.

Wages growth could set Australia's rates trajectory https://fingfx.thomsonreuters.com/gfx/mkt/dgkvlrdrnvb/Pasted%20image%201625113112769.png

3/ FED WATCH

Fed June meeting minutes on Wednesday will be scrutinized after a hawkish shift roiled markets last month.

Policymakers moved their first projected rate hikes to 2023 from 2024 and opened talks on how to end crisis-era bond buying.

While this should put pressure on risk assets, stocks have recovered since and hit new highs, helped by reassuring words from Fed Chair Jerome Powell, who's reaffirmed its intent to encourage a "broad and inclusive" recovery in jobs and not raise rates too quickly.

Markets will analyse the language on rising consumer prices and other indications that officials believe a strong recovery means the end of aggressive policy support could come soon.

A 2023 rate liftoff? https://fingfx.thomsonreuters.com/gfx/mkt/qzjvqxwlbpx/Pasted%20image%201625083391546.png

4/ SUMMER WASHOUT?

The risks of another summer cancelled due to COVID-19 are rising as the Delta variant surges globally.

The United Nations issued a dire warning that international tourism arrivals are set to stagnate this year, racking up to $2.4 trillion in losses, and it's been a tough few days for travel and tourism stocks.

A southern European travel share index of companies wiped over 500 million euros ($590 million) off its market capitalisation in the week to July 1, Refinitiv data shows.

But don't put away the beach towels and sun cream just yet.

The EU has launched a digital COVID certificate system to open up tourism. Germany, for one, could ease travel restrictions from countries where the Delta variant already dominates if it is sure vaccinated people are protected.

Summer theme https://fingfx.thomsonreuters.com/gfx/mkt/ygdvzzmkrvw/summer%20theme.JPG

5/ GREENS GET THE BLUES

With just three months to go until German elections - Europe's key political event this year - polls seem to confirm that Greens are losing their mojo. Leader Annalena Baerbock faces plagiarism allegations and questions over her CV, and the party is struggling with a Christmas bonus payments scandal and a regional election setback.

Having briefly surged in the polls after Baerbock was picked as chancellor candidate, latest surveys show the Greens with 20% of votes, trailing well behind Angela Merkel's ruling CDU/CSU on 30%.

The shifting permutations of Germany's coalition arithmetic matter for future policy in Europe's largest economy. Right now, a CDU/CSU-led coalition with the Greens looks likely - a combination expected to bring more continuity than change.

But then there's still some time to go.

German conservatives lead in opinion polls https://graphics.reuters.com/GLOBAL-MARKETS/rlgvdrokavo/chart.png

($1 = 0.8456 euros)

Take Five: Aussie rates, Fed minutes and summer unknowns
 

Related Articles

Dollar falls as U.S. yields ease; euro rallies
Dollar falls as U.S. yields ease; euro rallies By Reuters - Oct 04, 2022

By Caroline Valetkevitch and Alun John NEW YORK/LONDON (Reuters) - The dollar slid against major currencies on Tuesday as the yield on the benchmark U.S. 10-year Treasury fell...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email