Positivity abounds! Optimism reigns this week regarding economies re-opening which age a strong boost to risk assets. Stocks, copper, oil, and bond yields all moved higher as hopes reign that a COVID-19 vaccine will be available by year-end. Even sad events, prompting US civil unrest this week, did not stop the risk-on mood. US ADP job data on Wednesday was also positive with a better than expected job loss print. The big question is, will this be the hoped for V-shaped recovery, or will risk markets pull back from recent highs in the coming days?

Key events from the past week

  • CAD: Interest Rate Statement, Wednesday, June 03. The Bank of Canada kept rates unchanged at 0.25% as expected on Wednesday, but the BoC was more optimistic than expected and this helped support CAD and the positive risk tone.
  • US-China: Trade war tensions fade, All week. On Monday there was relief that President Trump hadn’t escalated US-China trade tensions over the weekend. This relief was the foundation for the optimism regarding economies opening up post COVID-19 lockdown, though underlying tensions remain.
  • EUR: ECB interest rate decision, June 04. The ECB kept rates unchanged but increased its Pandemic Emergency Purchase Program by 600bln euros to a total of 1350bln. This extra stimulus provides a solid stimulus boost to the eurozone.

Key events for the coming week

  • OPEC: Meeting moved, June, TBC. Saudi Arabia has proposed moving the OPEC+ meeting to the middle of June according to delegates. This is due to members haggling over oil quota cheating. Delays should weigh on oil prices.
  • USD: FED interest rate decision, June 10. No interest rate change expected. OIS projections for the next year point to rates remaining unchanged. This chimes with recent Fed talk showing an unwillingness to take US rates negative.
  • Multiple risks: Medium Term Risk Abound! These are from Brexit, from US-China trade tensions, China-Australia tensions, headwinds from the ‘frugal four’ on the European relief fund, and that is not to even mention the second wave infection risk from COVID-19.