Two G7 central banks meet and at least half a dozen emerging market central banks. There is a European Summit and perhaps a political effort to reinvigorate the UK-EU trade talks, which seem to be crashing on the shoals of stubbornness. The ECB offers its most generous long-term targeted loan that is bound to see earlier loans rolled into this new one. Further evidence that the world’s largest economy has taken a baby step toward recovery.
Let’s unpack next week’s events. But first, note that the events will take place as the recovery in risk assets appears to have come to an end with a flourish last week. That correction, which seemed overdue, appears to have more room to run. Also, the Covid virus continues to spread globally, and businesses, investors, and policymakers are sensitive to the so-called second-wave as countries and states re-open. Below are thumbnail sketches of the events and data that shape the macro picture.
- EU Summit: The European Council (heads of state) hold a virtual meeting on June 18 to ostensibly discuss the EU’s May 27 Recovery Fund proposal. Some have heralded the proposal as a key turning point in the evolution of Europe, and the possibility of a so-called Hamiltonian moment, a major set toward fiscal union, has been suggested. We have been less sanguine; recognizing the potential scaffolding for a greater union, but also that projecting emergency actions into the future is fraught with danger. Austria and Denmark, which have pushed back against grants instead of loans, could be won over by assurances that their rebates will remain intact. Others, including Eastern and Central European members, may be more difficult to persuade. Although expectations are running high, we suspect an agreement will remain elusive, in which case another try will be at the July summit, which, with a little luck, could be in person. Disappointment could weigh on the euro.
