BMO Capital Markets Economics | A Weekly Financial Digest

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Focus

Commodity Outlook: Rally Looking Harder to Sustain Currency Matters

FOMC Preview: COVID Concerns and Framework Fixes

U.S. Recovery Hits a Speed Bump

Breaking Down Canada’s Retail Rebound

Europe: Deal or No Deal?

July 24, 2020

Feature Article

Our Thoughts

     Our Thoughts

Currency Matters

.

Douglas Porter, CFA,

Chief Economist

douglas.porter@bmo.com

In a year that has seen wild gyrations in most asset classes and an historic economicadjustment, one market has largely been the financial equivalent of a wallflowerat the 2020 rave. Even amid the swiftest bear market and fastest recovery everfor equities, record lows for bond yields, near-record highs for gold, negative oilprices, and sharp swings in credit spreads, currency markets have, for the most part,had a non-descript year. Certainly, some emerging economy currencies have beenbludgeoned, but that’s not exactly an uncommon occurrence in any year. The trade-weighted U.S. dollar did pop nearly 8% amid the March market maelstrom, but quicklycalmed, and it is now basically back to pre-pandemic levels against the other majorcurrencies. Against all currencies, the dollar is now up just over 2% since the start of2020…ho hum, not exactly a year for the FX history books.

That surface currency calm may be about to change. One of the reasons whycurrencies have moved little on net is, of course, that they are simply relative prices,and all economies have been thumped by the virus, albeit to varying degrees. The bigdollar did take on its usual safe-haven role during the March turmoil, and that quickrally has since unwound as other markets settled down. Attention is now turning toother medium-term issues beyond the pandemic, and the dollar’s shine is fadingunder that harsher light.

.  

(as of July 24, 2020)

Jul ’19 Oct Jan ’20 Apr Jul

1.28

1.32

1.36

1.40

1.44

1.48

112

116

120

124

128

Broad trade-weighted US$¹

vs C$²

The Dollar’s Full Circle

¹ (lhs : January 2, 2006 = 100); ² (rhs : C$/US$)

Sources: BMO Economics, Haver Analytics

Many of the biggest near-term factors are stacking upagainst the dollar. With the November election nowbarely 100 days away, U.S. virus cases accelerating (andsome rollback in openings), friction with China heatingup, and interest rate spreads gone and forgotten, thegreenback’s prospects are fading. The counterweights arethe formidable strength of the U.S. tech sector, and theeconomy’s better long-run growth potential comparedwith most other majors. Rumbling in the backgroundis fiscal uncertainty, with bumped-up UI paymentspoised to expire at the end of the month, and Congresscareening toward the edge of the so-called fiscal cliff. Anew stimulus deal would be a net positive pulse for thedollar; the absence of a deal potentially punishing.

It hasn’t all been about the U.S. dollar this year, as there are some undercurrents inother economies which could have some say in the FX outlook. Here’s a quick look atthe majors, from strongest to weakest in 2020 (YTD changes in brackets):

The euro (+3.5%) has strengthened markedly in the past two months, cracking the$1.16 level for the first time since the autumn of 2018. In contrast to the uncertain fiscalbackdrop in the U.S., European leaders managed to reach a significant deal on the €750billion (US$870 billion) recovery package. While perhaps not quite as generous as firstproposed, and while overall fiscal support has been lighter than mostly elsewhere,the agreement is still a big step forward for the EU (see Jennifer’s Thought for moredetail). While hit hard by the virus early on, and accompanying tough shutdowns, theregional economy is in recovery mode and infections are now low. Today’s July PMIs

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     Our Thoughts

for the Euro Area were impressively strong, with the region’s composite index poppingto 54.8.

The yen (+2.5%) gyrated in March, initially benefitting as a safe haven, and nowfinding some added support amid a less-negative economic backdrop than manyothers. Japan came into 2020 knee-deep in a downturn, driven by the increase in thesales tax, but hopeful that the Tokyo Olympics would provide a boost (initially plannedto start today). With the virus containment measures much lighter in Japan than inmost other economies, it will also see a lighter GDP hit, notwithstanding Tokyo'srecent uptick in cases. Even with a very weak starting point and almost zero underlyinggrowth potential, we look for “only” a 4.5% drop in Japan’s economy for 2020, by farthe mildest drop in the G7.

The Australian dollar (+0.9%) has carved out almost a perfect V-shaped recovery thisyear, after plunging almost 19% by the March lows to below 58 cents (US). The early-year wildfires (yes, that was this year) temporarily weighed as well. But supportedby a comeback in many hard commodities, and a general rebound in risk assets,the Aussie dollar has flared back by over 22% from the lows to almost 71 cents. Ontop of its normal drivers, Australia’s economy has so far been much less hard-hit bylockdowns, although the recent flare-up in cases in Melbourne has dented the outlook.Even so, we look for GDP there to drop “only” 4% this year. While that marks the firstrecession in Australia since the early 1990s, bringing its record-busting string of non-recession years to a halt, that’s a much lighter downturn than in, say, Canada (wherewe expect GDP to drop 6%).

The Chinese yuan (-0.8%) is almost all the way back to where it started the year,right around the 7/US$ mark. Compared to other currencies, and even compared withrecent years, the yuan has moved little during this traumatic episode for the globaleconomy. That stability is no doubt partly by design, as the currency was also stablein the immediate aftermath of the 2008/09 recession (pretty much pegged againstthe dollar for two years). The huge positive for the yuan is that China’s economy hassnapped back quickly from the early-year shutdown, with GDP on track to grow byroughly 2% in 2020. The negative is the renewed friction with the U.S., including thisweek’s closures of respective consulate offices. Even President Trump sounded lessenthused about the U.S./China trade deal this week, although sorting noise from signalis especially challenging as we approach the election.

The Canadian dollar (-3.3%) has notably underperformed its Australian cousin, andeven moreso its distant euro relative in 2020. The weakness versus Aussie can bepartly explained by a harder economic hit from the virus, and a deeper fiscal dive.While Ottawa’s budget deficit is now poised to reach almost 16% of GDP, Australia’sfiscal update this week pointed to something still below 10%. True, S&P affirmed itsAAA rating for Canada this week (as opposed to Fitch), but the ratings agency addedthat this was under the assumption that the deficit would come down heavily nextyear as the economy recovers. The other weight on the loonie relative to the Aussiehas been oil. While energy prices continue in their grinding recovery, WTI is still downmore than 30% since January, a clear relative negative for Canada. Even so, we havebecome a bit more constructive on the loonie’s outlook amid a dimmer U.S. dollarbackdrop, as well as some encouraging domestic data. A big bounce in both retail and

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     Our Thoughts

manufacturing sales in June, according to flash estimates, suggests that the economy isroughly tracking the “least-bad” scenario.

The U.K. pound (-3.8%) is the laggard among the majors this year, even with adouble-digit bounce from the March lows. After dropping below US$1.15 at one stage,Sterling has fired back to almost $1.28 in recent days. Some impressive economic datarecently have helped, including a V-shaped comeback in retail trade, and strong JulyPMIs (57.1 on the composite). However, bigger picture, the pound is the laggard dueto the ongoing cloud of uncertainty around Brexit and the lingering risk of a hard exit,as well as a tougher virus experience than many. The economy is expected to suffer a10% contraction this year.

Looking just a bit beyond the majors, the Mexican peso (-15.8%) has been wallopedthis year, along with a variety of other significant emerging market currencies. SouthAfrica and Turkey have seen roughly similar setbacks, while Brazil has been evenharder hit (as it has been by the virus). While Mexico recently inked the USMCA, weakoil prices, the tourism drought, and low business confidence have combined with theglobal downturn to pound the peso.

After more than four months of almost no sports, we are now suddenly headed fora month with four sports in full gear. The official “play ball” for baseball yesterdaytakes us another step towards something approaching the new normal. That is, insofaras empty stadiums, fake fan noise, masked players, and hockey in August can beconsidered “normal”. And it would really help to get back to quasi-normal for thebroader economy if only the COVID curve can be flattened again stateside… hopefullymore effectively than Dr. Fauci’s first-pitch curve, that is.

FOMC Preview: COVID Concerns and Framework Fixes

.

Michael Gregory, CFA,

Deputy Chief Economistmichael.gregory@bmo.com

Amid the last FOMC meeting in June, new COVID-19 infections in the U.S. had beentrending down before stabilizing. According to Johns Hopkins University, after peakingabove 44,000 on April 10, the seven-day average of new coronavirus cases stabilizedbelow 30,000 from May 27 to June 15. The curve has since turned up again, with thenew case trend above 91,000 (July 23), more than double its prior peak. As the FOMCmeets again on July 28-29, this disturbing turn of events will no doubt be a focusof discussion, posing a significant risk to the robustness of the economic recovery.The pandemic-related lockdowns caused the shortest recession in history (just twomonths), but also the deepest post-war downturn. Advance GDP data for Q2 arealso released next week (July 30) and will provide a first look at just how deep thedownturn was. We’re projecting a peak-to-trough contraction of more than 13%, triplethe GDP loss of the Great Recession and the most since the Great Depression.

In June’s post-meeting presser, Chair Powell said, “we are strongly committed tousing our tools to do whatever we can—and for as long as it takes—to provide somerelief and stability, to ensure that the recovery will be as strong as possible, and tolimit lasting damage to the economy.” Amid a now-doubled infection rate, we lookfor the Fed to double down on this ‘mission statement’. We’re not anticipatingany new policy measures (although one can’t rule that out); but, just an emphaticrecommitment to the current ones. These measures include keeping policy ratesat the effective lower bound until the Committee “is confident that the economy has

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     Our Thoughts

weathered recent events and is on track to achieve its maximum employment andprice stability goals”, which would appear to be past the end of 2022 according to thelatest ‘dot plot’. They are also purchasing at least $120 bln per month of Treasuriesand MBS, on top of the $2.34 trillion already amassed since March 11, and operatingfive (Treasury-sponsored) lending facilities with a current capacity to lend up to $2.05trillion.

The lending facilities have, so far, been underwhelming, with only $117 billion onthe books. The Fed has been regularly modifying the facilities to make them moreeffective. This week alone, counterparties were expanded for the Term Asset-BackedSecurities Loan Facility, Secondary Market Corporate Credit Facility, and CommercialPaper Funding Facility. Also, the Main Street Lending Program was modified to includenonprofits, such as educational institutions, hospitals, and social service organizations.

Another focus of the FOMC will probably be the Fed’s review of its monetary policyframework… its strategy, tools and communication practices. On June 12, the Fedpublished the findings of its public-opinion-soliciting “Fed Listens” effort. Theseincluded last year’s events at each of the 12 Fed Districts and the Board of Governors,along with a research conference, and this year’s unplanned final virtual event whichsought post-pandemic perspectives from past panelists. These findings are being usedby FOMC participants to inform on how best to improve the current framework, asare the various staff briefings, which, at the last meeting, included one on outcome-based forward guidance for the fed funds rate and another on yield caps or targetspolicies. It’s not clear when the review will be completed (it wasn’t as of June 10), andwhen any modifications to the current monetary framework will be announced. Thesedates have already been pushed back this year because of the pandemic and, giventhe worrisome surge in new coronavirus cases since last month’s meeting, we suspectany framework fixes will be announced at the September meeting, at the earliest. But,here too, one can’t rule out an announcement as early as next week. In the wake ofthe pandemic, policymakers have revealed an ability to act expeditiously.

U.S. Recovery Hits a Speed Bump

.

Sal Guatieri,

Senior Economist

sal.guatieri@bmo.com

June data suggest the U.S. economy ended the second quarter in much bettershape than it started when parts of it were under lockdown and people feared goingout. This week’s releases showed existing home sales popping 21% in June and newhome sales blowing past pre-virus levels to 13-year highs. The housing market ischugging along, partly because a wave of teleworkers are seeking roomier, cheaperhomes in the ’burbs. Capturing the broader upswing in June activity, the Chicago Fed’sNational Activity Index also strengthened.

Unfortunately, due to renewed restrictions on some business activity to containthe resurgence in infections, the July data are looking more mixed than up.While the Kansas City Fed’s manufacturing index joined the New York and Philly Fed’smeasures to show a virtual V-shaped snapback in the sector, weekly and real-timedata suggest activity has hit a speed bump. The New York Fed’s Weekly EconomicIndex slipped in mid-July following a steady climb since April. Initial jobless claims (ona seasonally-adjusted basis) rose for the first time in nearly four months. However,continuing claims continued to grind lower from nose-bleed levels, suggesting morecompanies are hiring than laying off workers (warehouses, for one, are hiring to meet

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the increased demand for online goods). Still, the July payrolls report likely won’t beas strong as June’s and could be a good deal weaker. Consumer spending also looksto have slowed after an expected 6% bounce in June. Though improving in the month,Johnson Redbook retail sales took a step back last week, while data on retail mobilityand credit card spending have leveled off. Earlier gains in hotel occupancy, air traveland indoor dining have also faded. More businesses have closed their doors recently,reflecting renewed restrictions in some states as well as continued weak demand inthe leisure, hospitality and travel space. However, business applications continue toclimb, suggesting some entrepreneurs are stepping up to the plate. After impressivegains of late, the housing market could take a breather, as the surge in new mortgageapplications has plateaued, albeit at 11-year highs. Alongside manufacturing, oil outputhas turned up in July in response to rising prices, as has steel output amid increasedauto production.

The next few weeks will be a crucial test for the recovery, one that almost entirelyrests on how successful the country is in controlling the outbreak of new cases. Ifrestrictions on consumer and business activity are limited to mostly indoor dining, bars,gyms and personal-care salons in some states, the recovery should continue, albeitat a slower pace than in the initial stage of reopenings. However, the reimposition ofrestrictions on a broader range of business activity, or a material reversal in consumersentiment due to anxiety about the outbreak, would exact a more material toll on theeconomy. Stay tuned.

Breaking Down Canada’s Retail Rebound

.

Benjamin Reitzes,

Canadian Rates & Macro

Strategistbenjamin.reitzes@bmo.com

Following the sharpest declines on record due to the lockdown, Canadian retail saleshave quickly bounced back to pre-pandemic levels. The speed of the rebound isa pleasant surprise, as it’s apparently tough to keep people from shopping. The latteris especially the case when there’s plenty of money flowing from the governmentdirectly to households. The bounce back in retail activity is just one more way in whichthis recession and recovery are different.

Digging a little deeper… the initial stages of the lockdown saw shoppers flock to onlineretailers for their needs. What other choice was there with most physical stores closed?Indeed, as the reopenings progressed and stores welcomed customers back throughtheir doors (even if in limited numbers), shoppers began to migrate back to physicalstores or shifted to online ordering with a physical pick-up. That went a step furtherin Phase 3 and as confidence grew around the benefits of wearing a mask. Still, thatdoesn’t fully explain why retail appears to have nearly fully rebounded by June, whileother sectors continue to lag.

It’s instructive that consumers shifted to online shopping when physical storeswere closed, moving their spending flow to what was available. That behaviouris likely what helped push retail sales back to pre-COVID levels. The services sectoris still operating either at very low capacity or not at all. Consumers cannot spendmoney in restaurants (take-out and outdoor dining only for much of the country),travel outside of the country is banned, sporting events, amusement parks, museumsand other cultural spots are closed until further notice. And, the services that areopen are functioning at reduced capacity due to physical distancing and the need todisinfect after every customer. With all of those spending avenues shut, Canadians

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     Our Thoughts

(and shoppers globally) are directing their money to what is open… and that’sretail. Note that retail sales are about half of total consumption, so we’ll have to waitfor Q2 GDP (and consumption) before seeing a more complete picture of the health ofconsumers.

Key Takeaway: The rebound in retail is encouraging, but there’s more than meets theeye.

Europe: Deal or No Deal?

.

Jennifer Lee,

Senior Economist

jennifer.lee@bmo.com

The answer is both! The 27 leaders of the European Union thrashed it out over a spanof almost five days but emerged victorious. They unanimously agreed to back the€750 bln EU Recovery Fund and the long-term EU budget of €1.074 trln. Everyonehad to give a little… the Frugal Four finally relented (the promise of a bigger rebate fortheir budget contributions made this bitter pill easier to swallow) and agreed to allow€390 bln in grants and €360 bln in low-interest loans. Conditions are attached to thegrants, with 70% to be allocated in 2021 and 2022 and the rest in 2023, using factorssuch as how much unemployment surged compared to the 2015-2019 period, and howmuch of a hit GDP took. Recovery plans will be assessed by a qualified majority of EUministers; and, if there is a problem, they have three months (no more) to stop thefunding. The countries in dire need of financial help, such as Italy, Spain and Poland,wanted €500 bln in grants but settled for less. And the biggest step made was that theEuropean Commission would borrow the €750 bln from the market by issuing commondebt, although the intent is that it would be temporary. Every bit must be repaid byDecember 31, 2058. But let’s not count our chickens before they hatch; after all, theEuropean Parliament must approve the deal too and, already, there is plenty that theMembers dislike.

However, the U.K. failed to hammer out a deal with the EU and the U.S. this week.This is the fourth week of more “intensified” negotiations with Brussels. And, DavidFrost, Britain’s negotiator, declared that it is "unfortunately clear that we will notreach in July" a deal, given that "considerable gaps remain". The EU’s Michel Barnierwas clearly frustrated, accusing Britain of not showing a readiness to find a solution.However, both still believe that a breakthrough in September is possible. Yes, we'veheard this many, many times before. It’s painful that four weeks of these negotiationshave failed to see any movement on the two big issues: the level playing field and thefisheries. What happened to the goal of having “tangible progress” by June?

In any event, there are five months remaining before the U.K. leaves the transitionperiod and the possibility of doing so without a trade deal is growing. It is alsovery unlikely that Britain will have a trade agreement with the U.S. to fallback on. Despite assurances from President Trump in June 2019 of a “phenomenal”trade deal, there are many hurdles to overcome. And, after this week’s talks, oneofficial declared that it will not happen this year. A touchy subject to overcome isagriculture or chlorine-washed chicken, a method that is banned by the EU. The U.K.is under pressure to relax that regulation but farmers are not happy about that. Then,there's the digital services tax, which the U.K. passed a bill on this week. And, that issomething that some U.S. senators are not too happy about, either.

One step forward, two steps back?

July 24, 2020 | Page 7 of 18

     Recap

Indications of stronger growth and a move toward price stability are good news for the economy.

Good News Bad News

Canada S&P maintains AAA

credit rating

Virus cases rising again

BoC announces new securities repo operation (SRO)

Retail Sales Volumes +17.8% (May) Consumer Prices +0.7% y/y (June) New Home Prices +1.3% y/y (June)

Province of Newfoundland and Labrador projects a budget deficit of $2.1 bln (FY20/21)

United States Coronavirus cases accelerate

Tensions with China intensify amid closure of Chinese Consulate in Houston

More stimulus from Washington?

Existing Home Sales +20.7% to 4.72 mln a.r. (June) New Home Sales +13.8% to 776,000 a.r. (June) —13-yr high Continuing Claims -1,107k to 16,197k (July 11 week) Chicago Fed National Activity Index +4.11 (June) Leading Indicator +2.0% (June)

Initial Claims +109k to 1,416k (July 18 week) FHFA Home Prices slowed to +4.9% y/y (May)

Japan BoJ Minutes indicate

policymakers worry about slipping back into deflation

Manufacturing PMI +2.5 pts to 42.6 (July P) Services PMI +0.2 pts to 45.2 (July P)

Exports -26.2% y/y; Imports -14.4% y/y (June) Consumer Prices +0.1% y/y (June) Department Store Sales -19.1% y/y (June)

Europe EU leaders agree on €750 bln

EU Recovery Fund… a “pivotal moment”

U.K./EU talks make little progress as deadline looms

Euro Area—Manufacturing PMI +3.7 pts to 51.1 (July P) Euro Area—Services PMI +6.8 pts to 55.1 (July P) Germany—GfK Consumer Confidence +9.1 pts to -0.3 (Aug.) France—Business Confidence +7 pts to 85 (July) U.K.—Retail Sales (incl. Fuel) +13.9% (June) U.K.—Manufacturing PMI +3.5 pts to 53.6 (July P) —highest since Mar. 2019 U.K.—Services PMI +9.5 pts to 56.6 (July P) —highest since July 2015 U.K.—GfK Consumer Confidence +3 pts to -27 (July P)

Euro Area—Consumer Confidence -0.3 pts to -15.0 (July A) Italy—Consumer Confidence -0.7 pts to 100.0 (July)

Other Beijing strikes back with

closure of the U.S. Consulate in Chengdu

Negative rates “extraordinarily unlikely” (RBA Minutes)

July 24, 2020 | Page 8 of 18

     Feature

Commodity Outlook: Rally Looking Harder to SustainCarl Campus, Aaron Goertzen, Sarah Howcroft and Art Woo

Commodities have rebounded strongly in recent months,boosted by a profound reversal in sentiment as morecountries emerged from lockdown and economicdata started to improve. By the end of Q2, the BMOCommodity Price Index had recovered roughly half of the34% loss sustained between December and April (seeChart 1). Assurances of sustained monetary policy supportand advancing COVID-19 vaccine trials have aided therally. The one area of exception is agricultural products,where COVID-related disruptions have continued topressure livestock prices. On the other hand, thanksto strong portfolio-driven gains in gold, the metalscomponent has already exceeded pre-virus levels and isnow approaching a seven-year high.

.  

120

140

160

180

200

220

18 19 20

All-Commodity Index

BMO Commodity Price Index

(2003 = 100)

Chart 1

Source: BMO Economics

To be sure, there is some cause for optimism at the six-month mark of the globalpandemic. Chinese industrial activity has bounced back solidly as Beijing’s stimulusmeasures had a speedy effect, leading to a better-than-expected 11.5% q/q jumpin Q2 real GDP. Activity has begun to revive elsewhere in the world, too, with mosteconomies on track to return to growth in Q3, which will underpin a continued pick-up in commodity demand. However, the road ahead is laden with risks, as geopoliticalfriction has resurfaced (most notably, between the U.S. and China) and economicreopening plans are being walked back in several countries to counter secondaryoutbreaks. Some commodities, including oil and metals, are likely to experience a mildretreat over the coming months, particularly as supply curbs unwind, before stabilizingor resuming a gradual upward trend.

Oil: After an impressive recovery since mid-April, oil prices are likely to remain range-bound in the near term. Beyond uncertainty related to COVID-19 and global demand,there is simply too much crude oil supply in the world, which explains why OPEC+ hassignalled that it will maintain heavy production cuts until 2022. Still, it seems unlikelythat oil prices will experience another steep dive even though OPEC+ recently decidedto taper its production cut target from 9.7 to 7.7 mb/d beginning in August. OPEC+’scut remains significant, equivalent to a decline of 7.7% compared to the 2019 globalaverage. The rebalancing of the crude oil market will also continue to receive supportfrom a reduction in North American production as Canadian and U.S. output has fallenin y/y terms by roughly 750 kb/d and 2.0 mb/d, respectively.

The big question continues to revolve around how fast global oil demand will recoveras widespread economic lockdowns are lifted, but it appears to be occurring fasterthan initially expected. The International Energy Agency’s latest forecasts have globaldemand, which collapsed by 16.4 mb/d to 82.4 mb/d in Q2/20, rebounding by 12.8 toaverage 95.6 mb/d in H2/20, or down just 5.1% y/y. If these projections prove roughlycorrect, the global supply/demand balance could witness a significant improvement,which would help to unwind the recent buildup in inventories. Put another way, the

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     Feature

balance of risks for crude oil prices could shift to the upside in 2021, notwithstandingongoing uncertainties related to containing the pandemic.

The near-term outlook for Western Canada Select (WCS) crude has likewise improveddue to rising WTI and the shut-in of Canadian oil production. The latter has resulted ina sharp decline in shipments of crude oil to the United States. This directly lowered thediscount of WCS to WTI, as fewer U.S. shipments have reduced the need to transportcrude oil by rail, which is much more expensive than transporting through pipelines tothe U.S. Midwest and Gulf Coast. Nevertheless, we expect the WCS discount to widennext year as some shut-in production is restarted and shipped to the U.S. via rail.

Metals: Precious metals have benefited strongly from the current global malaise.Gold is flirting with all-time records and silver recently cracked the US$22-mark for thefirst time in six years. Strategic asset allocation remains the primary catalyst, as ultra-loose monetary policy and safe-haven demand have fuelled record ETF inflows. Absentinflationary pressures, central banks will remain committed to providing additionalliquidity as necessary; and, as such, real interest rates should remain close to historicallows—and, in many cases, negative—for some time. This bodes well for preciousmetals, notwithstanding weak jewelry demand. After trailing gold in the early stagesof the pandemic, silver has staged an impressive catch-up in recent months on theback of heightened supply constraints and expectations for rising stimulus-backeddemand related to solar panels and 5G towers. In turn, the gold-to-silver ratio hassharply declined from its March peak, though it remains considerably above historicalnorms. While both metals are expected to pull back from current elevated levels overthe near term, silver should broadly outperform on an average annual basis in 2021 asthe global industrial recovery gains momentum.

The solid post-lockdown snapback in Chinese industrial demand and supply disruptionsin some markets have boosted fundamentals and risk sentiment in the base metalssegment in recent weeks. The outlook for H2 largely depends on what happens outsideChina in terms of virus containment and economic normalization. While we continueto expect a gradual recovery, downside risks are heightened amid renewed U.S./Chinatrade friction and surging global COVID-19 infections. From a fundamental perspective,copper and nickel look most attractive, with solid long-term demand prospects linkedto the sustainable energy transition and increased constraints on raw material supply.However, at close to US$3/lb, current copper pricing looks somewhat stretched giventhat the market still faces a surplus over the next few years. At the other end of thespectrum, aluminum has underperformed in the recent rally. With production relativelyunaffected by shutdowns, inventories have surged and, even with some supply cutslikely, it will take years to clear the overhang.

Forest Products: After initially being knocked back to multi-year lows amid theCOVID-related collapse in homebuilding activity, lumber prices have marched sharplyhigher in recent weeks as restarted production has struggled to keep up with resilientdemand, keeping inventory levels tight. U.S. housing starts declined to a five-year lowin April, but that could very well mark the bottom for residential construction, as startsimproved in May and June, and homebuilder confidence returned to near-record levelsin July alongside aggressive fiscal measures and record-low interest rates. Nonetheless,U.S. housing starts are still expected to remain well below their recent peak for theforeseeable future. However, residential construction north of the border has seen

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much less volatility, with Canadian housing starts averaging over 200,000 annualizedunits in May and June—just below the average pace for 2019. Providing further support,the renovation and repair segment has been quite resilient as broad stay-at-homeorders during the initial outbreak gave many the time and inspiration to take up DIYprojects.

Still, with production running at relatively high levels for this time of year, lumberprices are expected to retreat in the second half of 2020 amid expected lowerU.S. duties on imports from Canada and generally slower demand, before broadlystabilizing in 2021 as market conditions return to a more balance state. Of course,with the resurgence of COVID-19 outbreaks in some states, both supply and demandconditions could once again experience disruptions from re-imposed shutdown ordersand a more prolonged economic recovery, presenting risks to the outlook.

Agriculture: The coronavirus outbreak has weighed heavily on livestock producers. Notonly did widespread meatpacker closures in the spring create a glut of animals at thefarm level, but ongoing social distancing measures have kept meatpacking capacitybelow pre-virus levels. The impact has been especially pronounced in the hog space,where supply was already elevated heading into 2020 and benchmark prices havefallen roughly 35% y/y to their lowest level since the early-2000s. Cattle prices alsodeclined sharply during the first half of the year, touching decade-lows in April, buthave staged a somewhat stronger recovery and are now down just 8% y/y, givenmore cautious herd expansion in recent years. Both hog and cattle prices should trendhigher over the remainder of the year as meatpackers continue to adapt their practicesto the coronavirus era and as producers reduce the headcount of their herds.

Most crop prices have held up fairly well through thepandemic, though they entered the year on a relativelyweak footing after years of strong global yields andproduction. Compared to meatpacking, grain and oilseedprocessing is far less labour-intensive and has not beensubject to widespread pandemic-related disruptions.In the wheat space, benchmark prices have fluctuatedaround US$5/bushel, as improved conditions in somegrowing regions have been offset by deterioratingconditions in others. Meantime, canola prices havetrended moderately higher alongside soybeans, givenChina’s large commitments to purchase the latter underits Phase One trade agreement with the United States.With stockpiles of key crops still elevated relative toconsumption, benchmark prices are likely to trend onlymodestly higher ahead. Gains across the crop space willalso be impeded by an excess supply of corn, as a drop-off in ethanol production has weighed heavily on demandfor that crop.

For further details, read the July 2020 issue of ourmonthly commodity report, The Goods.

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Table 1

Commodity Price Outlook(annual averages)

2019   2020   2021 

Energy

Crude Oil a US$/bbl 57 38 45

Natural Gas bUS$/mmbtu 2.57 1.90 2.25

Metals

Gold US$/oz 1,393 1,710 1,700

Silver US$/oz 16.20 17.50 18.00

Aluminum US$/lb 0.81 0.72 0.77

Copper US$/lb 2.72 2.60 2.70

Nickel US$/lb 6.31 5.90 6.75

Zinc US$/lb 1.16 0.90 0.93

Forest Products

Lumber US$/mbf 360 375 350

Agriculture

Wheat US$/bushel 4.94 5.30 5.40

Canola US$/tonne 344 345 370

Cattle US$/cwt 116 106 118

Hogs US$/cwt 70 55 77 Sources: BMO Economics, Haver Analytics

a WTI; b Henry Hub

Forecasts

July 24, 2020 | Page 11 of 18

     Economic Forecast

.

Economic Forecast Summary for July 24, 2020

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

CANADA

Real GDP (q/q % chng : a.r.) -8.2 -40.0 42.0 10.0 7.0 4.2 2.5 2.5 1.7 -6.0 6.0

Consumer Price Index (y/y % chng) 1.8 0.0 0.8 0.6 0.9 2.1 1.5 1.6 1.9 0.8 1.5

Unemployment Rate (percent) 6.3 13.0 9.9 9.0 8.5 8.2 7.8 7.5 5.7 9.5 8.0

Housing Starts (000s : a.r.) 209 191 190 193 205 205 220 228 209 195 215

Current Account Balance ($blns : a.r.) -44.4 -73.7 -63.4 -58.6 -55.1 -54.0 -51.8 -51.0 -47.0 -60.0 -53.0

Interest Rates

Overnight Rate 1.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 1.75 0.50 0.25

3-month Treasury Bill 1.29 0.22 0.15 0.15 0.15 0.15 0.15 0.15 1.65 0.45 0.15

10-year Bond 1.20 0.59 0.60 0.75 0.85 0.95 1.05 1.10 1.59 0.80 1.00

Canada-U.S. Interest Rate Spreads

90-day 16 8 3 3 3 3 3 3 -45 7 3

10-year -18 -10 -11 -10 -9 -8 -7 -6 -56 -12 -8

UNITED STATES

Real GDP (q/q % chng : a.r.) -5.0 -40.0 36.0 7.0 5.9 5.2 4.1 3.2 2.3 -5.5 5.0

Consumer Price Index (y/y % chng) 2.1 0.4 0.6 0.5 0.6 1.9 1.7 1.7 1.8 0.9 1.5

Unemployment Rate (percent) 3.8 13.0 9.8 9.0 8.1 7.3 6.6 6.2 3.7 8.9 7.0

Housing Starts (mlns : a.r.) 1.48 1.04 1.25 1.31 1.28 1.29 1.29 1.30 1.30 1.27 1.29

Current Account Balance ($blns : a.r.) -417 -558 -593 -612 -624 -630 -639 -647 -480 -545 -635

Interest Rates

Fed Funds Target Rate 1.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 2.13 0.38 0.13

3-month Treasury Bill 1.13 0.14 0.15 0.15 0.15 0.15 0.15 0.15 2.10 0.40 0.15

10-year Note 1.38 0.69 0.70 0.85 0.95 1.05 1.10 1.20 2.14 0.90 1.05

EXCHANGE RATES

US¢/C$ 74.4 72.2 74.3 75.0 75.4 75.7 75.9 76.2 75.4 74.0 75.8

C$/US$ 1.34 1.39 1.35 1.33 1.33 1.32 1.32 1.31 1.33 1.35 1.32

¥/US$ 109 108 108 109 111 112 113 115 109 108 113

US$/Euro 1.10 1.10 1.15 1.16 1.17 1.18 1.18 1.19 1.12 1.13 1.18

US$/£ 1.28 1.24 1.26 1.28 1.28 1.29 1.29 1.30 1.28 1.27 1.29

Blocked areas mark BMO Capital Markets forecasts; up and down arrows ( ) indicate forecast changes; spreads may differ due to rounding

(average for the quarter : %)

(average for the quarter : bps)

(average for the quarter : %)

(average for the quarter)

2020 2021 Annual

2019 2020 2021

July 24, 2020 | Page 12 of 18

     Key for Next Week

Canada

.

Benjamin Reitzes,

Canadian Rates & Macro

Strategistbenjamin.reitzes@bmo.com

.

Monthly Real GDPFriday, 8:30 am

May (e) +3.5%

Consensus +3.5%

May P +3.0%

Apr. -11.6%

The broader Canadian economy bottomed in April, with activity slowly coming back inMay amid the initial stage of reopenings. Retail sales rebounded impressively, whilemanufacturing and wholesale sales saw solid gains as well. Home sales got up offthe mat, which should also help related services sectors. Look for a hearty rebound inconstruction, with Quebec reopening the sector after being the only province to fullyshut it down. Not to be left out, health care (think dentists, physio, etc.) is expectedto see a big increase, too. That’s the good news. On the flip side, hotels/restaurants,arts/entertainment, cultural, and transportation (air traffic remains extremely low withborders shut) will remain at weak levels, seeing only modest improvements at best.Indeed, those sectors are in for a very lengthy recovery.

Putting it all together, we’re looking for GDP to rise 3.5%, modestly above StatsCan’sflash estimate of +3%, reflecting the upside risks to its early forecast. We’re alsoanticipating that StatsCan will release a preliminary estimate for June GDP which willgive us a better bead on the depth of Q2’s contraction and how strong of a jump-offpoint we’ll have for Q3. In line with last week’s Focus feature, look for somethingaround a 7%-to-8% gain for June.

United States

.

Michael Gregory, CFA,

Deputy Chief Economistmichael.gregory@bmo.com

.

Sal Guatieri,

Senior Economist

sal.guatieri@bmo.com

.

Durable Goods OrdersMonday, 8:30 am

Ex. Trans.

June (e) +6.0% +3.6%

Consensus +6.8% +3.5%

May +15.7% +3.7%

Nondef. Cap. Goods

ex. Air

June (e) +2.2%

Consensus +2.3%

May +1.6%

Factories continued to ramp up production in June from their locked down levels inMarch and April. Overall output rose 7.2%, after rising 3.8% in May and falling 20.1%in the previous two months, with new orders in tow. The ISM’s new orders metricregistered a record 24.6 spike in June (data go back to 1948) to sit at 56.4 (which isthe highest level since January 2019). In turn, we look for durable goods orders togrow 6.0% in June or 3.6% ex-transportation, and for core capital goods orders (non-defense ex-aircraft) to increase 2.2%. One source of turbulence for the headline figurewill be aircraft orders. Boeing booked only one new plane in June after nine in May,but cancellations are wreaking havoc on the sector’s new orders data. There werenegative dollar amounts in March (with 31 new bookings) and in April (with zero).

.

FOMC AnnouncementWednesday, 2:00 pm

Press videoconference at 2:30 pm

See Michael Gregory’s Thought on page 4.

July 24, 2020 | Page 13 of 18

     Key for Next Week

.

Real GDPThursday, 8:30 am

GDP

Deflator

Q2 A (e) -40.0% a.r. -0.1% a.r.

Consensus -35.0% a.r. +0.1% a.r.

Q1 -5.0% a.r. +1.4% a.r.

Brace yourself for the worst economic contraction in 62 years of official BEA data.U.S. real GDP likely plunged about 40% annualized in Q2, four times worse than the10% tumble in 1958Q1 (also during a pandemic). What makes this recession deeperthan the 1958 downturn is the mandated lockdowns of non-essential businesses anda somewhat steeper slide in consumer sentiment. Consumer spending and businessinvestment are expected to contract about as much as the aggregate, while residentialconstruction likely fell less given a sharp snapback in home sales. Exports look to havetumbled more than imports, and a hefty inventory drawdown will also weigh due toearlier factory shutdowns. The only sector likely to advance is federal governmentspending. However, this should be more than offset by a sharp decline in state andlocal government spending as budget balances came under heavy pressure. RealGDP likely fell 12% y/y, though an expected sharp rebound in Q3 could carve thisfigure in half. Beyond the reopening phase, a more prolonged period of recuperationcould prevent the economy from returning to pre-virus levels until early 2022. Theresurgence in infections and some rolling back of reopenings in several states will onlyextend the convalescence timeframe.

.

Personal Spendingand IncomeFriday, 8:30 am

Personal Personal

Spending Income

June (e) +6.0% -2.7%

Consensus +5.5% -0.8%

May +8.2% -4.2%

Core PCE Price Index

June (e) +0.2% +0.9% y/y

Consensus +0.2% +1.0% y/y

May +0.1% +1.0% y/y

We will get a bead on the June spending number from the release of the Q2 GDPreport. However, the monthly number could say something about momentumheading into Q3—which looks to have faded due to the flare-up in infections. Personalspending is expected to jump 6.0% in June, building on an 8.2% bounce in May toretrace about half of the prior two-month plunge. Personal income looks to havefallen 2.7%, as the impact of faster job growth was likely more than offset by theunwinding of the one-off CARES Act payments and a decline in the rate of UI benefitpayments. Due to the federal support measures, personal income has jumped abovepre-virus levels, supporting consumption while keeping the savings rate sky-high(23.2% in May). Core PCE prices likely stepped up to a 0.2% pace in June, though thismay still clip the yearly rate slightly to 0.9%, the lowest since 2010.

Euro Area

.

Jennifer Lee,

Senior Economist

jennifer.lee@bmo.com

.

Real GDPFriday

Q2 A (e) -12.0% -14.5% y/y

Q1 -3.6% -3.1% y/y

The Euro Area will get a first look at what is expected to be an historic dive in Q2real GDP. It will be ugly; it is expected to post something similar to the U.S. at around-40% annualized, even though the region took a much bigger Q1 hit. However, sincereopening, the economy has rebounded and more recent indicators for July have beenvery encouraging, pointing to a very big bounce in Q3.

July 24, 2020 | Page 14 of 18

     Financials Markets Update

.

Financial Markets Update for July 24, 2020

Jul 24 ¹ Jul 17 Week Ago 4 Weeks Ago Dec 31, 2019

Canadian Call Money 0.25 0.25 0 0 -150

Money Market Prime Rate 2.45 2.45 0 0 -150

U.S. Money Fed Funds (effective) 0.25 0.25 0 0 -150

Market Prime Rate 3.25 3.25 0 0 -150

3-Month Rates Canada 0.17 0.17 0 -3 -149

United States 0.11 0.10 0 -3 -144

Japan -0.09 -0.09 0 1 2

Eurozone -0.45 -0.44 -1 -5 -7

United Kingdom 0.08 0.08 1 -6 -71

Australia 0.10 0.11 0 0 -81

2-Year Bonds Canada 0.28 0.27 1 -1 -141

United States 0.14 0.15 0 -2 -143

10-Year Bonds Canada 0.51 0.52 -1 1 -119

United States 0.59 0.63 -4 -6 -133

Japan 0.02 0.01 1 2 4

Germany -0.44 -0.45 1 5 -25

United Kingdom 0.15 0.16 -1 -2 -67

Australia 0.87 0.87 0 0 -50

Risk Indicators VIX 27.2 25.7 1.5 pts -7.5 pts 13.4 pts

TED Spread 14 17 -3 -3 -22

Inv. Grade CDS Spread ² 69 72 -3 -11 24

High Yield CDS Spread ² 458 476 -17 -73 178

Currencies US¢/C$ 74.54 73.64 1.2 2.0 -3.2

C$/US$ 1.342 1.358 — — —

¥/US$ 105.79 107.02 -1.1 -1.3 -2.6

US$/€ 1.1633 1.1428 1.8 3.7 3.7

US$/£ 1.279 1.257 1.7 3.7 -3.5

US¢/A$ 70.99 69.96 1.5 3.4 1.1

Commodities CRB Futures Index 142.87 140.83 1.4 6.3 -23.1

Oil (generic contract) 41.12 40.75 0.9 6.8 -32.7

Natural Gas (generic contract) 1.78 1.72 3.5 18.9 -18.8

Gold (spot price) 1,903.11 1,810.42 5.1 7.4 25.4

Equities S&P/TSX Composite 15,947 16,123 -1.1 5.0 -6.5

S&P 500 3,213 3,225 -0.4 6.8 -0.5

Nasdaq 10,362 10,503 -1.3 6.2 15.5

Dow Jones Industrial 26,576 26,672 -0.4 6.2 -6.9

Nikkei 22,752 22,696 0.2 1.1 -3.8

Frankfurt DAX 12,858 12,920 -0.5 6.4 -2.9

London FT100 6,130 6,290 -2.5 -0.5 -18.7

France CAC40 4,954 5,069 -2.3 0.9 -17.1

S&P ASX 200 6,024 6,034 -0.2 2.0 -9.9

¹ = as of 10:55 am ² = One day delay

(percent change)

(basis point change)

July 24, 2020 | Page 15 of 18

     Global Calendar — July 27–July 31

Monday July 27 Tuesday July 28 Wednesday July 29 Thursday July 30 Friday July 31

Japa

n Capital Spending Q1 F (e) +4.3% y/y Q4 -3.5% y/y All-Industry Activity Index May (e) -3.5% Apr. -6.4%

BoJ Summary of Opinions from July 14-15 meeting

Retail Sales June (e) +8.0% -6.0% y/y May +1.9% -12.5% y/y

Jobless Rate June (e) 3.0% May 2.9% Industrial Production June P (e) +0.9% -19.1% y/y May -8.9% -26.3% y/y

F R A N C E Consumer Confidence July (e) 98 June 97

E U R O A R E A Economic Confidence July (e) 81.3 June 75.7 Consumer Confidence July F (e) -15.0 June -14.7 Jobless Rate June (e) 7.7% May 7.4%

ECB Economic Bulletin G E R M A N Y

Real GDP Q2 P (e) -9.0% -11.2% y/y Q1 -2.2% -2.3% y/y Unemploy. Jobless Rate July (e) +45,000 6.5% June +69,000 6.4% Consumer Price Index July P (e) -0.2% +0.4% y/y June +0.7% +0.8% y/y

E U R O A R E A Real GDP Q2 A (e) -12.0% -14.5% y/y Q1 -3.6% -3.1% y/y Consumer Price Index July P (e) -0.5% +0.3% y/y June +03% +0.3% y/y Core CPI July P (e) +0.8% y/y June +0.8% y/y

G E R M A N Y Retail Sales June (e) -3.0% +3.2% y/y May +12.7% +3.2% y/y

F R A N C E Real GDP Q2 P (e) -15.6% -19.7% y/y Q1 -5.3% -5.0% y/y Consumer Spending June (e) +6.9% -1.9% y/y May +36.6% -8.3% y/y Consumer Price Index July P (e) -0.1% +0.3% y/y June +0.1% +0.2% y/y

I T A L Y Real GDP Q2 P (e) -15.0% -16.9% y/y Q1 -5.3% -5.4% y/y Retail Sales June May +24.3% -10.5% y/y Consumer Price Index July P (e) -1.4% -0.1% y/y June unch -0.4% y/y

Euro

Are

a E U R O A R E A M3 Money Supply June (e) +9.3% y/y May +8.9% y/y

G E R M A N Y ifo Business Climate July (e) 89.3 June 86.2

U.K.

Nationwide House Prices D July (e) -0.1% -0.3% y/y June -1.4% -0.1% y/y

GfK Consumer Confidence July F (e) -27 June -30

Othe

r

A U S T R A L I A Consumer Price Index Q2 (e) -2.0% -0.5% y/y Q1 +0.3% +2.2% y/y

A U S T R A L I A Building Approvals June (e) -2.0% May -16.4%

M E X I C O Real GDP Q2 P Q1 -1.2% -1.4% y/y

C H I N A PMI Mfg. Non-mfg. July (e) 50.8 54.5 June 50.9 54.4

D = date approximate Upcoming Policy Meetings | Bank of England: Aug. 6, Sep. 17, Nov. 5 | European Central Bank: Sep. 10, Oct. 29, Dec. 10

July 24, 2020 | Page 16 of 18

     North American Calendar — July 27–July 31

Monday July 27 Tuesday July 28 Wednesday July 29 Thursday July 30 Friday July 31

Cana

da

BoC Buyback: 5-year sector  10:30 am 3-, 6- & 12-month bill auction $10.0 bln (new cash -$10.6 bln)

BoC Buyback: Under 2-year sector 

BoC Buyback: 30-year sector 

8:30 am Survey of Employment, Payrolls, and Hours (May)

Noon 3-year bond auction $5.0 bln

5- & 10-year bond auction announcements

BoC Buyback: 2-year sector

8:30 am Monthly Real GDP May (e) +3.5% Consensus +3.5% May P +3.0% Apr. -11.6% 8:30 am Industrial Raw

Product Materials Price Index Price Index

June (e) +0.4% +7.0% May +1.1% +16.4% 8:30 am Building Permits June (e) +4.5% May +20.2% Ottawa’s Budget Balance D May ’20 May ’19 +$0.7 bln Apr. ’20 Apr. ’19 -$2.1 bln

BoC Buyback: 10-year sector

Unite

d St

ates

8:30 am Durable Goods Orders Ex. Transport

June (e) +6.0% +3.6% Consensus +6.8% +3.5% May +15.7% +3.7% 8:30 am Nondef. Cap. Goods ex. Air June (e) +2.2% Consensus +2.3% May +1.6% 10:30 am Dallas Fed Mfg. Activity July (e) -4.9 C June -6.1

11:30 am 26-week bill auction $51 bln

11:30 am 2-year note auction $48 bln

1:00 pm 13-week bill auction $54 bln

1:00 pm 5-year note auction $49 bln

9:00 am S&P Case-Shiller Home Price Index (20 city)

May (e) +0.1% +3.9% y/y Consensus +0.3% +4.1% y/y Apr. +0.3% +4.0% y/y 10:00 am Conference Board

Consumer Confidence Index

July (e) 94.0 Consensus 94.5 June 98.1 10:00 am Richmond Fed

Manufacturing Index July (e) 5 C June 0

FOMC Meeting begins

11:00 am 4- & 8-week bill auction announcements

11:30 am 120-day cash management bill auction $30 bln

11:30 am 42-day cash management bill auction $30 bln

1:00 pm 2-year FRN auction $24 bln

1:00 pm 7-year note auction $44 bln

7:00 am MBA Mortgage Apps July 24 July 17 +4.1% 8:30 am Goods Trade Deficit June A (e) $74.3 bln C May $75.3 bln 8:30 am Wholesale and Retail

Inventories (June A)

10:00 am Pending Home Sales June (e) +16.2 C May +44.3% 2:00 pm FOMC Announcement

2:30 pm Fed Chair Powell’s press video conference

8:30 am Real GDP GDP Deflator

Q2 A (e) -40.0% a.r. -0.1% a.r. Consensus -35.0% a.r. +0.1% a.r. Q1 -5.0% a.r. +1.4% a.r. 8:30 am Initial Claims July 25 (e) 1,510k (+94k)

July 18 1,416k (+109k) 8:30 am Continuing Claims July 18 July 11 16,197k (-1,107k)

11:00 am 13- & 26-week bill auction announcements

11:30 am 4- & 8-week bill auctions

8:30 am Personal Personal Spending Income

June (e) +6.0% -2.7% Consensus +5.5% -0.8% May +8.2% -4.2% 8:30 am Core PCE Price Index June (e) +0.2% +0.9% y/y Consensus +0.2% +1.0% y/y May +0.1% +1.0% y/y 8:30 am Employment Cost Index Q2 (e) +0.6% +2.8% y/y Consensus +0.6% +2.8% y/y Q1 +0.8% +2.8% y/y 9:45 am Chicago PMI July (e) 43.9 C June 36.6 10:00 am University of Michigan

Consumer Sentiment July F (e) 72.8 C July P 73.2 June 78.1

C = consensus D = date approximate R = reopening Upcoming Policy Meetings | Bank of Canada: Sep. 9, Oct. 28, Dec. 9 | FOMC: Sep. 15-16, Nov. 4-5, Dec. 15-16

July 24, 2020 | Page 17 of 18

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To Thai Residents: The contents hereof are intended solely for the use of persons qualified as Institutional Investors according to Notification of the Securities and Exchange Commission No. GorKor. 11/2547 Re:Characteristics of Advice which are not deemed as Conducting Derivatives Advisory Services dated 23 January 2004 (as amended). BMO and its affiliates do not represent that the material may be lawfully distributed,or that any financial products may be lawfully offered, in compliance with any regulatory requirements in Thailand, or pursuant to an exemption available under any applicable laws and regulations.

To U.S. Residents: BMO Capital Markets Corp. furnishes this report to U.S. residents and accepts responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal.

These documents are provided to you on the express understanding that they must be held in complete confidence and not republished, retransmitted, distributed, disclosed, or otherwise made available, in whole orin part, directly or indirectly, in hard or soft copy, through any means, to any person, except with the prior written consent of BMO Capital Markets.

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BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and corporate banking products. BMO serves Canadian retailclients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and commercial banking clients are served by BMO Harris Bank N.A., (Member FDIC). Investment and corporate bankingservices are provided in Canada and the US through BMO Capital Markets.

BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A. (member FDIC), Bank of Montreal Europe p.l.c, and Bank of Montreal(China) Co. Ltd, the institutional broker dealer business of BMO Capital Markets Corp. (Member FINRA and SIPC) and the agency broker dealer business of Clearpool Execution Services, LLC (Member FINRA and SIPC)in the U.S., and the institutional broker dealer businesses of BMO Nesbitt Burns Inc. (Member Investment Industry Regulatory Organization of Canada and Member Canadian Investor Protection Fund) in Canada andAsia, Bank of Montreal Europe p.l.c. (authorised and regulated by the Central Bank of Ireland) in Europe and BMO Capital Markets Limited (authorised and regulated by the Financial Conduct Authority) in the UK andAustralia.

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