As the vaccine roll-out gathers momentum, key data from China, the U.S. and UK indicate signs of economic growth. This week, Lee Hardman, currency analyst, looks at what this global economic recovery could mean for the markets, which are looking increasingly upbeat, and gives his views on the recent weakening of the dollar.

Lee also outlines what to look out for at the upcoming Bank of Canada meeting on Wednesday.

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While daily COVID-19 cases and fatalities in developed markets (DM) have fallen by more than 50% and 70%, respectively, from their January peak, both continue to set new highs across emerging markets (EM), raising apprehensions about a lagged recovery.

Reopenings, contagious strains, slower vaccinations and higher uncertainty surrounding the efficacy of certain vaccines pose significant risks of renewed EM outbreaks. Having said that, Ehsan Khoman, Head of Emerging Markets Research (EMEA), discusses three key reasons as to why he still remains constructive on the EM outlook in 2021.

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FOMC Participants’ expectations for the year 2021 have moved up a lot in terms of GDP and employment growth and in total and core consumer inflation. Still, in his recent comments, Chair Powell relates risk that those expectations may be ratcheted up even higher at the June 15-16 2021 Meeting. MUFG U.S. Rates Strategist John Herrmann, argues that the Committee participants need to “catch up” not only to the strong economic rebound over the month of March, but also to the persistence of strength in the economy over the balance of the summer and of the year.

In today’s podcast, John reviews the CPI report and previews the retail sales report. His models forecast a remarkable surge in retail spending over the coming months of March, April, May and into June. In turn, John’s GDP growth rate forecast remains the highest of all professional forecasters in the Bloomberg survey, at +9.03% yoy in 2021, and his growth forecast remains near 260 bps stronger than the FOMC’s projection.  

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In this episode, Glenn Schultz, MUFG Head of Agency Mortgage Prepayment Modeling and Strategy, discusses whether or not the March remit data is a sign of the end of the refinance wave. He also discusses the implications of the CFPB’s extension on borrower forbearance and how this will impact home prices.

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Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, explains why the focus is on U.S. treasury auctions this week, as the markets nervously eye a potential lift in yields. Added to this, the CPI data for March is also on the horizon, threatening to drive yields up.

Derek also gives his analysis of a reversal trend whereby currencies which did well in the first quarter of the year have underperformed so far in April and his outlook for CAD amidst a lockdown in Ontario and an upcoming Bank of Canada meeting.

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The economic fallout from COVID-19 has fallen hardest on emerging markets where healthcare costs and unprecedented economic contractions have exacerbated already heavy debt burdens.

In a coordinated effort to address these challenges, the IMF is preparing to inject USD650bn worth of Special Drawing Rights (SDR) – a financial instrument that bolsters balance sheets – to navigate mounting debt strains.

Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises this significant development and offers his insights as to why the allocated share of this additional SDR liquidity will in fact be heavily skewed more towards developed (not emerging) markets.

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In the latest podcast, U.S. Rates Strategist John Herrmann reviews the most recent monthly employment report, both in terms of the remarkably strong and broad-based growth in nonfarm payrolls, alongside an extremely rapid descent in the number of U3 unemployed individuals.  

John contrasts and evaluates the current jobs performance over the past twelve months to that of the Bernanke cycle over its initial five years and five months (from late 2009 through early 2015). The current cycle is head and shoulders stronger than the Bernanke cycle, and John asks the question, why can Chair Powell not see the glaring difference? 

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We are now in FY21. The Tokyo market volatility has not picked up noticeably. JPY rates and basis are stable as the Nikkei Average rises and USDJPY firms in the JPY110 level. The BoJ has shown that it plans to cut purchases of JGBs in April. The Ministry of Finance plans to increase issuances of JGBs in FY21 but will cut issuances of short-term debt in April. The BoJ’s March Tankan survey showed that Japanese corporate sentiment is improving.

In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses Japan’s economy and Japanese corporate investing and export assumption exchange rates based on the Tankan survey, as well as the BoJ’s JGB buying plans and the MoF’s stance toward fund supply and demand and TDB issuances in April. He also shares his outlooks for Dollar/Yen, Yen rates, and Yen basis.

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The U.S. is set to lead recovery among advanced global economies, with business confidence looking extremely buoyant as markets price in the good news of strong employment data and speedy vaccine rollout.

This week on the podcast, Lee Hardman, currency analyst, gives a breakdown of what we can expect from USD going forward and what is driving the current sell-off of the currency.

He also takes a close look at what fuelling performance of short term yields, which have been edging slowly higher.

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