Saturday July 2, 2016 - 12:12:46 GMT
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Bank of England Carney To The Rescue
John M. Bland, MBA
Markets in the latest week were picking up the pieces after the Brexit victory at the end of the prior week. The outcome of the vote was a surprise to most political pundits and has left the U.K. political system in shambles. With the establishment on both sides of the aisle having favored the losing "Stay" side, a lot of heads are rolling. The Conservatives in the next few weeks will settle on two candidates for party leader. From the two, one should emerge as the new Prime Minister. Odds are also that the Labour Party will have to find a new leader. What this instability implies for the U.K. financial markets is a lot of uncertainty, and they do not like uncertainty.
Bank of England Governor Carney has promised to do all that is in his power to support the markets and the economy, which likely could result in an interest rate cut over the summer. The GBP remains especially vulnerable.
Current Trading Trends
The process of adjusting to Brexit has been taking a while with the U.K. government in disarray and markets working though the end of 2Q16. Liquidity has not been as good as had been before Brexit, but it is bound to continue to improve gradually. Negative interest rate policies (NIRP) have been a constraint on interbank lending,especially in Europe, whee the European Central Bank has ben forced to step up and provide funds to a money market system where banks are reluctant to lend money to one another at negative rates. Even the algos appear to have been a bit retrained. I feel that the USD is set to benefit from a safe-haven role in the months ahead along with the JPY.
WEEKLY HIGH IMPACT NEWS:
00:00 US- Holiday
08:28 GB- Construction PMI
13:30 CA- Markit PMI
04:30 AU- Reserve Bank of Australia
All Day Service PMIs
US- Service PMIs
18:00 US- Policy Minutes
12:15 US- ADP Jobs
12:30 US- Weekly Jobless
15:00 US- Weekly Crude
00:30 GB- Trade
12:30 US/CA Employment
18:00 US- Policy Minutes
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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