Saturday June 25, 2016 - 11:46:03 GMT
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Brexit Vote Outcome Shakes Financial Markets
John M. Bland, MBA
The U.K. Brexit vote was a shocker. Early exit polls confirmed an as expected victory for "Remain", but then the tide turned as the votes were actually tallied and the "Leave" vote prevailed by 52% to 48% with the leave side getting 17mln votes vs 16mln for stay. Markets had been set up for a "Stay" outcome and reacted mildly positively to the initial reports. They then reacted strongly and negatively to the "Leave" victory as the data came in. I had been warning of an asymmetric risk to the vote and was proved correct.
The vote has had political consequences with PM Cameron announcing that he will be stepping down as Prime Minister by October. The fact that there will be a several month period of continuity in U.K. leadership was comforting to the markets as it signals tat any changes vis-a-vis Europe will not be abrupt. There could be consequences overseas in the days and months ahead.
Current Trading Trends
In time, I think the focus will turn back squarely on the U.S. economy. The Fed recently took a surprisngly dovish turn on policy guidance. Some feel it was an article by former Treasury Secretary Summers that had turned the FOMC around by making them see the error of their ways. In short the FOMC acknowledged that the longer term growth potential of the economy has slowed and the "neutral" level of interest rates correspondingly has fallen. This lowered the odds for one rate hike before year end into the 50-50 area from talk of several hikes before the close of 2016. Brexit could be another reason for Fed caution.
WEEKLY HIGH IMPACT NEWS:
06:00 DE- Retail Sales
13:45 US- Flash Services PMI
12:30 US- GDP
14:00 US- CB Confidence
12:30 US- PCE Deflator
14:00 US- Pending Homes Sales
14:30 US- Crude
07:55 DE- Employment
08:30 GB- GDP
09:00 EZ- flash HICP
12:30 US- Weekly Jobless
23:30 JP- CPI
23:50:JP- Tankan Survey
00:00 CA- Holiday
ALL DAY- final Mfg PMIs
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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