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ECB Is The Highlight Of The Day

Market movers today

COVID-19 cases where certain states set record-high numbers, earnings reports and the ECB policy meeting are in focus today.

At the ECB meeting today (decision at 13:45 CEST and press conference at 14:30 CEST), we expect a repetition of recent comments from various governing council members, thereby striking a cautiously optimistic tone compared to the June projections. We also expect the ECB to reiterate that it may not to use the EUR1,350bn PEPP envelope in full. No new initiatives are expected today. We do not rule out a discussion about adjusting the tiering multiplier, although our baseline remains that any decision to increase the tiering multiplier would occur at a later stage. Markets may not be prepared for a ‘less dovish’ message, see more in ECB Research: Steady course, but cautiously optimistic, 10 July.

Weekly US jobless claims are also out today

Selected market news

Risk assets were again positive yesterday digesting the positive news that Moderna’s COVID-19 vaccine is making progress, which was followed up by AstraZeneca. California and Texas hit record-high infections. Asian equity markets failed to carry over the positive risk sentiment despite Chinese data beating expectations.

Global market trends are increasingly looking like a renewed relative rotation out of the stay-at-home winners (tech, USD) towards reflation trades (Dax, energy, EM FX) and not a global/US growth scare. We continue to see EUR/USD as being part of this rotation. Indeed, Europe has the right sector mix (banks, industry, autos) and political backdrop to make sure spot goes higher when the global market reprices nominal growth. With this in mind (and we have not even begun to price Brexit optimism) we have started to think we can overshoot our short-term 1M and 3M target at 1.15. We also continue to be optimistic on EM for especially ZAR, while RUB should also be able to catch up.

Chinese GDP rose 3.2% y/y in the second quarter, beating expectations of 2.4%.

OPEC+ (incl. Russia) said that its decision to gradually begin ending the production cuts in August (-7.7 million barrels versus 9.6 million barrels currently) will barely be felt as it expects more oil supply will be requested from higher demand.

Danske Bank
Danske Bankhttp://www.danskebank.com/danskeresearch
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