ON DECK FOR MONDAY, MAY 15
KEY POINTS:
- Markets in mild risk-off mode
- Turkish lira slips after first round election
- Thai baht rallies after weekend election
- Minor US, CDN releases on tap
- Hawkish Fed-speak with more on tap today
- Global Week Ahead
As a reminder, please see the Global Week Ahead—It’s Only Natural here in publication format and here in slide deck format.
Key topics:
- Markets are getting more nervous about the debt ceiling
- The Fed’s neutral rate
- Canadian inflation is likely to remain sticky
- Banxico expected to pause
- PBoC on cut watch
- BSP may hold
- UK job markets driving wage pressures
- Australian wage growth expected to increase
- A prudent NZ budget?
- Japanese inflation to rise again
- US, CDN consumer updates
- BoC’s financial stability assessment
- Out with Erdogan?
- Other global macro
We’re starting off a new trading week with a mild risk-on bias across asset classes but with little beyond vague hope serving as the catalyst. US and Canadian equity futures are gently higher along with European cash markets. Sovereign bonds are cheaper by a few basis points across countries and maturities. The dollar is ever so slightly weaker on a DXY basis.
Overnight developments were very light. Weekend talks restored plans to hold a debt ceiling meeting tomorrow after Friday’s talks were cancelled; don’t hold your breath for anything in the near term.
The PBoC met expectations by holding its 1-year Medium-Term Lending Facility Rate unchanged at 2.75% (only Bloomberg expected a cut). Destabilizing the yuan amid uncertainty toward the Fed’s next steps continues to hold back the PBoC despite basically never hitting its 3% inflation target that lacks credibility. If you had to pick one central bank that has shown the least interest in its inflation target over time then the PBoC would top the list.
Turks have a chance to boot Erdogan and his ruinous macroeconomic policies, but the vote may be too close—albeit favouring Erdogan so far—and so a runoff will be held on May 28th. The thoroughly debased lira is mildly weaker so far this morning. If Erdogan ultimately wins, then the lira is destined to collapse again and Turks will have blown their chance in an updated version of how you get what you voted for.
The Thai baht is among the winners following Thailand’s election in which pro-democracy elements made strong gains amid uncertainty over whether they will succeed in forming a coalition government against the military government.
The N.A. calendar will be light today with just a few relatively minor releases and Fed-speak throughout the day. Recall that on Friday evening both Bullard and Fed Governor and Vice Chair nominee Philip Jefferson delivered hawkish remarks. Today we’ll hear from Atlanta Fed President Bostic four times (7:30amET, 8:45, 2pm and 3pm), plus Chicago’s Goolsbee (8:30amET), Minneapolis President Kashkari (9:15amET) and Governor Cook (5pmET). Canada will update housing starts (8:15amET) and existing home sales (9amET) for the month of April plus wholesale trade for March (8:30amET). The US updates the Empire manufacturing gauge for May (8:30amET).
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.