In our Investment Bank Outlook each week, we bring you a selection of perspectives from leading investment banks to outline the key issues and directional views for the week ahead. These excerpts, taken from research notes, will cover issues such as key market themes, economic releases, as well as any major trends and levels to watch. Please note, this material, which does not reflect the opinions of Tickmill, is provided for educational purposes only and should not be taken as an investment recommendation.

RBC Capital Markets

Week ahead: Most of the week’s scheduled G10 central bank news (Fed, Norges Bank, BoJ and SNB) has been pre-empted by weekend announcements. In EM, BCB is expected to cut another 25bp to 4% (Wed), CBRT and SARB both announce rates on Thursday. We also get the minutes of the last RBA meeting (tonight), labour market reports in Australia and the UK and CPI and retail sales in Canada.

JPY: The BoJ was scheduled to announce policy on Wed/Thurs, but has said that announcement will be brought forward to today. It goes without saying, its easing options are severely curtailed. A small minority expect a cut in the policy balance rate, though after the ECB, this seems even less likely. A combination of a step up in ETF purchases and special loan facilities for companies struggling with the effect of COVID-19 seems most likely and would probably have limited implications for JPY.

CAD: On Friday afternoon, the BoC cut rates by 50bp to 0.75%. The move was earlier than our economists expected, but is in line with their expectation rates will fall to 0.25% by mid-year. Alongside the rate cut, the central bank announced a new banker's acceptance purchase facility (BAPF) that is intended to improve funding conditions for Canadian businesses. Weaker gas prices and base effects should depress CPI inflation in February (Wed), with the BoC’s core measures also slowing. January retail sales (Fri) should be solid, but are dated, given subsequent developments.

NOK: The 50bp rate cut on Friday (plus liquidity provisions and a capital buffer adjustment) effectively delivered the monetary easing that was unanimously expected at Norges Bank’s scheduled meeting on Thursday. The MPR, also issued early, showed a central projection of another (final) cut by September, but the clear risk is that rates fall earlier and further. Nonetheless, there is little further for Norges Bank to say this week.

CHF: Economists are split 50/50 on whether the SNB cuts the policy rate to -1.0% or holds at -0.75% this week.

AUD: Tonight’s RBA minutes will read dovish but have, in part, been superseded by further weakness in global risk and active central banks elsewhere.

Citi

·       USD: The Fed took decisive action again, cutting by 100bps, introducing USD 700bn of asset purchases (across treasuries and MBS) and announcing further measures to support credit provision (including cutting reserve requirements to zero, lower the rate on discount window loans to 0.25%). The full statement is available here.

·       Chair Powell subsequently spoke, noting that

–    Negative rates are not likely appropriate. The Fed has no legal authority to buy other assets and is not currently seeking it. Wednesday’s FOMC meeting will not go ahead.

–    As for purchase timing and size guidance for securities Powell announced: that the Fed will be open ended and not bound by size or time caps from Monday.

–    On the Fed’s current toolkit, we note that Treasury Secretary Mnuchin signaled more for markets, stating that “we [Treasury office] are looking at the tools we have and they [the Fed] are looking at the tools they have. Certain tools were taken away from both of us after the financial crisis with Dodd-Frank. If we need more tools, we will go back to Congress and get bipartisan support to get that."

·       JPY: BoJ moved forward its policy meeting and in Monday’s Asia session, announced that the policy rate would remain at -0.1% but that target ETF purchases would rise to JPY 12tn vs 6tn prior, confirming CitiFX Strategy’s stance on BoJ. The vote to up ETF purchases was unanimous. Watch out for a press conference by Governor Kuroda at 07:00 GMT.

·       NZD saw RBNZ cut the OCR by 75bps to 0.25%. RBNZ also provided forward guidance that the OCR will remain there for at least the next twelve months. The last time the RBNZ moved by more than 50bps was during the GFC. Citi Economics notes that in the latest statement, “gone was the cautious optimism that accompanied the February policy statement, instead replaced by concerns about spending and investment and higher interest rate spreads. We expect the RBNZ to revise down its economic forecasts.” Watch out for a fiscal package on March 17 of in excess of NZD 12bn.

·       AUD could see RBA put under further pressure following the RBNZ move. Citi Economics notes that it now expects the RBA to announce a 25bp rate cut ahead of the April meeting and to follow this up with an announcement on QE. The RBA maintains a preference for bond purchases or yield control. Headlines point to March 19 for the RBA to announce further measures.

·       What now following the Fed?

–    CitiFX Chief Strategist Ebrahim Rahbari: We think US Treasury is likely to announce additional measures soon, potentially jointly with the Fed, which could include a TLTRO-type facility or measures dedicated to the CP market. We also expect further announcements early this week, including from Eurozone finance ministers today, Canada but also the US. However, we also expect further increases in virus case counts and increasingly stringent restrictions on movements across and within many countries.

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.

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