Here is what you need to know on Tuesday, June 30:
The second quarter, which has been seeing a substantial rebound in markets, is drawing to an end on a positive note, despite the resurgence of COVID-19 in the US and elsewhere. US consumer confidence, the Fed Chair’s testimony, eurozone inflation, Canadian GDP, and coronavirus figures are eyed.
Risk on: US stock futures are pointing to gains and the US dollar is losing some ground on the last day of the second quarter. Investors are encouraged by official Chinese Purchasing Managers’ Indexes which have exceeded expectations and topped 50 points in June – pointing to a rebound and future growth.
One of the critical upside drivers has been central bank support. Jerome Powell, Chairman of the Federal Reserve, will testify alongside Treasury Secretary Steven Mnuchin. Powell’s prepared remarks have been released and there he stresses that uncertainty is uncertain and hinges on the virus.
See Powell’s Testimony Preview: Can he invigorate the risk trade?
While he is encouraged by the sooner-than-expected recovery, he stresses it will take time to return to pre-pandemic levels and pledged to support the economy. Mary Daly, his colleague from the San Francisco Fed, said she penciled in slow growth and amid high uncertainty.
Investors are somewhat encouraged by upbeat US Pending Home Sales, which leaped by 44.3% in May. Ahead of the testimony, the Conference Board’s Consumer Confidence gauge for June is set to show another bounce.
See Consumer Confidence Preivvew: Modest improvement coronavirus: Arizona and Los Angeles County have announced new restrictions as COVID-19 cases continue surging, especially in the Sun Belt. Some states are re-closing and others – as far as New Jersey which successfully depressed the disease – are halting the reopening.
New York may delay indoor dining in a decision due out shortly. Monday’s figures were marginally better than beforehand – perhaps due to the “weekend effect.” New data will be closely watched.
Masks: Several states are demanding wearing face masks and Goldman Sachs says it could substitute lockdowns and boost Gross Domestic Product by as much as 5%. Vice President Mike Pence has been calling for wearing them while President Donald Trump has yet to do so.
US politics: Trump is under scrutiny regarding his role around intelligence reports suggesting Russia paid mercenaries to kill US personnel in Afghanistan. The president is trailing rival Joe Biden by around 9% ahead of November’s elections.
Sino-American tensions: China has passed the controversial Hong Kong law, and set to become effective on Wednesday. Washington is considering imposing defense exports on the city-state. In the meantime, a new flu virus with “pandemic potential” has the potential to jump from pigs to humans.
EUR/USD has been hovering around 1.12 as a turbulent quarter nears an end. Christine Lagarde, President of the European Central Bank, pledged to continue supporting the economy and called on governments to play their part. Preliminary inflation figures for June are set to show an increase, following upbeat statistics from Germany and Spain.
See Eurozone Inflation Preview: EUR/USD has room to rise if Core CPI tops 1% amid positive bias
GBP/USD has been struggling below 1.23 as the UK is set to reimpose Leicester, a mid-sized city, under lockdown following a breakout of COVID-19. Final GDP figures for the first quarter have shown a drop of 2.2% in output, worse than initially estimated and that is also weighing on sterling. The rest of the nation is on course to continue its gradual reopening. Brexit talks resumed on Monday, this time face-to-face, and a breakthrough is still awaited.
Prime Minister Boris Johnson is scheduled to deliver a speech later on Tuesday, laying out plans for infrastructure spending and other expenditure worth around £5 billion. Skeptics say some of the details have already been published.
AUD/USD is attempting to recover despite an increase in coronavirus cases in the land down under. Queensland is set to keep its border with Victoria closed as the southern states are also set to slap a lockdown on parts of Melbourne. Australia’s reopening plans are in doubt.
USD/CAD is trading below 1.37 as oil prices are consolidating their gains, with WTI hovering just below $40. ahead of Canada’s GDP figures for April, the first look into the second quarter, which is forecast to show a double-digit plunge.
Gold prices are on course to close the quarter with the strongest increase in years, hovering around $1,770. Central bank support may continue pushing it higher.
Cryptocurrencies have stabilized with Bitcoin clinging to the $9,100 level.
End-of-quarter flows may trigger elevated volatility later on Tuesday.