Saturday June 18, 2016 - 01:06:08 GMT
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Too Much To Handle: Fed And Brexit?
John M. Bland, MBA
Finally The Brexit Vote
This week on Thursday, June 23, the U.K. will finally hold its referendum on whether it should leave the EU ("BREXIT"). The vote is non-binding, but if it passes it is expected to put into motion actions to eventually exit the U.K. from the EU. If it passes, it could also see the Cameron Government fall and possibly trigger national elections. In short, it could result in considerable political uncertainty in the U.K. Markets have been taking a defensive posture into the vote. Its outcome is expected to be very close. Recent polls have mostly been showing the "Leave" vote gathering momentum. Many political experts expect last minute deciders to favor "Stay". We expect financial markets and the GBP to react strongly to either a "Leave" or "Stay" outcome.
Click to participate in our Brexit Poll
Fed Policy Turn
Fed policy took a surprisngly dovish turn in the latest week following a much weaker than expected May employment report released at the start of the month. This policy shift was fundamental as the central bank appeared to accept that the longer term growth potential of the economy has slowed and the "neutral" level of interest rates correspondingly has fallen. As a result, Fed Funds futures odds on a rate hike in July are now a scant 6% and they only price in 40% odds on one hike by year-end. This news has been a blow to the fundamentally bullish USD scenario of the markets. We could move now more in the direction of a two-way trading market. Fed Chair Yellen testifies this week before Congress, and this change in the long term outlook for the economy should be a major topic of discussion.
WEEKLY HIGH IMPACT NEWS:
20-Jun MONDAY
No Major Data
21-Jun TUESDAY
09:00 DE- ZEW Survey
14:00 US- Yellen Testimony
22-Jun WEDNESDAY
12:30 CA- Retail Sales
14:00 US- Existing Homes Sales
14:00 US- Yellen Testimony
14:30 US- Crude Oil
23-Jun THURSDAY
All Day flash PMIs
24-Jun FRIDAY
08:00 DE- IFO Survey
14:00 US- prelim Univ of Mich
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
co-founder
www.global-view.com
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