Investment Bank Outlook 02-07-2021
RBC Capital Markets
Day ahead: Apart from the focus on the OPEC+ deliberations, US payrolls dominate the calendar ahead of the long weekend in the US (see USD). Other releases include trade balance, factory orders, durable goods (final) in the US, the unemployment rate in NO, and the goods trade balance, building permits, and Markit mfg. PMI in CA (see CAD).
There are central bank speakers from the ECB (de Cos at 08:00 BST & Lagarde at 13:30 BST), while the CNB publishes the minutes of the June meeting (08:00 BST). At this meeting, the CNB had hiked rates by 25bps in a split decision (with one of the members calling for an even larger hike) and Governor Rusnok had stated that “it’s possible” that rates will be hiked at every meeting this year.
USD: As it relates to this June payroll report, our economists maintain that the right thing to do is to go in with low expectations for the many technical reasons they have been highlighting over the last couple of months (seasonal adjustment and sample issues). The US economy has an enormous amount of momentum at the moment—it’s just not showing up in the NFP report. As a result, our economists recognize that there will be a month where NFP surprises us all to the upside.
Indeed, there are a few subcategories of employment that are truly ripe for a surge. Whenever that upside surprise does finally occur, all that it will reveal is that the payroll report finally caught up with the reality we all knew about the backdrop, i.e., the economy is absolutely humming. Having said that, RBC expects another below median consensus number (570k for headline, 490k for private; please see here for more details from our economists). From an FX perspective, it is important to highlight that there is a wide range of estimates around the median consensus going into today’s release (when comparing to the pre-pandemic period), which raises the bar for a significant FX market reaction.
Citi
The USD continues to enjoy its walk towards the NFP print, and the long weekend for the US. EURUSD is back at an important support range while USDCNH has been marching higher. Risk reduction was the key theme overnight, resulting in net USD buying on our eTrading platforms. Today’s NFP print presents two way risks, but recent positioning suggests it’s going to be a choppy event.
Chinese equities traded weaker overnight, after the Communist Party’s 100th anniversary celebrations yesterday and after the PBoC drained a net CNY20bn via monetary tools overnight. COP saw a credit rating downgrade to high yield from Fitch, as expected. The European session should be dominated by pre-NFP positioning, with just ECB Lagarde featuring again.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.