By Bilal Hafeez 25-06-2020
In: post | Newsletter

Exclusives: Second Waves But No Second Lockdowns / Fed Hurting Foreign UST Holdings?/ UK’s Misguided VAT Debate

(4 min read)
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Markets are worried about a spike in US COVID cases and the possibility of renewed lockdowns. Don’t worry, writes Dominique Dwor-Frecaut, as she lays out three reasons why lockdowns are unlikely.

On the US economy, John Tierney looks into what continuing jobless claims is telling us about the labour market recovery. Then, US rates guru George Goncalves looks at whether Fed swap lines and repo facility will reduce future foreign demand for US Treasuries. This follows on from his note last week on the dwindling foreign appetite for UST.

Given how badly national polls did in 2016 US elections, we expand our US election tracker to include polls in key swing states. They’re all looking favourable for Biden. Meanwhile, our updated COVID tracker today details the spike COVID cases across various US states.

Away from the US, UK economist Phil Rush argues against the benefits of a potential UK VAT cut – the government could do it anyway. And Caroline Grady gives a comprehensive update on Asian FX markets – well worth a read for followers of FX.




New US COVID-19 Cases Are Rising, But New Lockdowns Remain Unlikely (3 min read) The growth in COVID-19 cases in the US is likely to accelerate further, but new blanket lockdowns from states appear unlikely: the virus has become less lethal, there is ample healthcare spare capacity, and the long-term epidemiological benefits of lockdowns are unclear while their economic costs are prohibitive…

(Dominique Dwor-Frecaut | 25th June, 2020)




Latest Jobless Claims Report Points to Soft June Employment Report (2 min read) The latest employment insurance claims report, released on Thursday morning, bodes poorly for next week’s June employment report. And it’s not just that weekly initial claims came in at 1.48 million despite the US being more than a month into reopening. The more troubling number is continuing claims, which has flatlined near 20 million since the week ending 23 May.. Employers are clearly in no rush to recall furloughed workers…

(John Tierney | 25th June, 2020)

Flows: Will Swap Lines / FIMA Reduce FCB Demand For US Treasuries? (4 min read) No two periods are alike but what is starkly different now from the GFC is that foreign investors (including foreign central banks – FCBs) were sellers of USTs during the early days of COVID-19 induced financial market stress. This was likely one of the reasons why the Fed stepped in to buy USTs in record amounts. However, the launch of swap lines and the FIMA repo facility helped reduce the need for FCBs to sell USTs to raise dollars…

(George Goncalves, Vikrant Kumar Chandan | 25th June, 2020)






UK: VAT Cut Is A Feasible Folly (3 min read) Recent reports indicate the government is considering a temporary VAT cut despite historical evidence that it makes little difference to UK consumption. The proposed cut is also terribly targeted to current needs, although a selective re-rating might work. If a headline cut is popular enough, it will probably happen irrespective of the merits. I estimate the pass-through of a 1yr cut at about 50% to the price level…

(Phil Rush | 25th June, 2020)


Intervention To Cap Further TWD Gains (9 min read) Markets have been on a bumpy ride over the past two weeks. Ongoing policy stimulus and relaxation of COVID lockdowns continue to buoy risk appetite. But new COVID outbreaks in the US, Germany and China leave ongoing concerns that the global recovery could yet be derailed.  A brief equity correction and bout of risk aversion pulled Asian currencies weaker in mid-June alongside other EMFX…

(Caroline Grady | 25th June, 2020)


Taiwan Dollar


Hive Indicators

Trump Shadow


US Election Tracker – Swing States Point To Biden Victory As election day draws closer, we expand our election tracker to include polls from the key swing states. These broadly back up findings from national polls showing Biden set to beat Trump. Polls showing only small margins in favour of Biden need to be treated with caution, however, given that these states (excl. Michigan) are more Republican than the national average…

(Bilal Hafeez | 25th June, 2020)


Global COVID-19 Tracker – US Sees Record Number Of New Daily Cases In the DM world, the US is making headlines with record new daily cases. Wednesday saw a 34,600 jump in new cases which translates, a 1.5% daily rise. New York, New Jersey, and Connecticut have asked individuals (including residents) arriving from states where cases are surging to self-isolate for 14-days…

(Bilal Hafeez, Stefan Posea | 25th June, 2020)


Coronavirus Update


(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)



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