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Brexit’s Over: What’s Next for Investors?
Perhaps it’s safe to say that the Brexit is the biggest financial market mover this year but there are still a number of top-tier events that could yield big moves and profit opportunities. Here’s a roundup of the next financial events to watch out for in the coming month.
US June NFP Release (July 8)
Traders’ attention could shift to the release of the US employment figures for June, especially since the previous month’s reading was pretty dismal. The May report showed a meager 38K increase in hiring, way below the projected 156K increase and enough to convince market watchers that the US central bank won’t be increasing interest rates in June.
The upcoming release should provide more clues as to whether the US jobs market is in a deep rut or not, as revisions to previous reports are also expected. Still, even an upbeat figure might not be enough to push the Fed to tighten now that a Brexit may take place.
BOE Inflation Report Hearings (July 12)
Although Bank of England Governor Mark Carney immediately shared his thoughts in a brief testimony after the Brexit vote, the BOE Inflation Report hearings should give market watchers a better chance of hearing what other policymakers have in mind. Carney mentioned that they have a range of monetary policy tools at their disposal and won’t hesitate to dole out stimulus if necessary.
BOC Interest Rate Statement (July 13)
The Bank of Canada has stayed on hold for its past few rate statements, especially since the rebound in crude oil prices has been encouraging for the Canadian economy. However, the BOC is also known for acting pre-emptively to shield Canada from adverse effects such as the oil price slump in the past year. With the Brexit threatening to dampen commodity prices once more, BOC officials might decide to ease before the situation worsens.
BOE Monetary Policy Decision (July 14)
With the Brexit likely to weigh on trade and investment activity, not to mention public finances, many are hoping that the folks over at the BOE would start implementing measures that would keep the economy supported. In his post-Brexit speech, Carney already reiterated that they have enough tools to ease if necessary so it would be interesting to see how the rest of the MPC votes on this.
Chinese Data Dump (July 15)
The slowdown in China has taken a backseat to all the Brexit-related updates in the past month but the release of their GDP, retail sales, fixed asset investment, and industrial production data should provide an updated look at how the world’s second largest economy is faring. The numbers have indicated subdued performance, which might factor into the Q2 GDP reading.
Keep in mind that the People’s Bank of China is also rumored to be acting in order to shield the Chinese economy from additional financial market stress. The government has also set the yuan trading range lower in order to keep its local currency weak and exports competitive.
ECB Interest Rate Decision (July 21)
In one of his speeches last month, European Central Bank head Mario Draghi has said that “further stimulus is in the pipeline” which means that it’s only a matter of time before they increase their quantitative easing efforts. The Brexit should provide them enough reason to prove more stimulus, especially since the euro zone is just in the middle of a feeble economic recovery.
Some speculate that the Brexit could leave the EU worse off, as this sets a precedent for other euro zone nations to leave the union, putting the very existence of the euro at risk. In addition, the lack of a favorable trade deal for the UK could also have ramifications on the EU, as a number of its nations have the UK as its top trade partner.
FOMC Statement (July 27)
The Federal Reserve has more than a month to iron out its statement following the Brexit, addressing the potential impact of this event on the US and global economy. No actual rate hikes are expected from the FOMC since the uncertainties springing from a Brexit would be a game changer.
Still, if the Fed continues to reassure markets that the US economy is on stable footing, the US dollar could keep banking on its safe-haven appeal. Then again, the Fed has also jawboned the dollar in a few instances, warning that excessive gains could be harmful for export activity.
BOJ Statement (July 28)
One of the first few central banks rumored to ease monetary policy immediately following the Brexit is the Bank of Japan. In fact, some say that the Japanese central bank engaged in currency intervention to prevent further yen rallies right after the EU referendum results were officially announced.
Government officials and some policymakers have hinted that further stimulus is in the cards in order to address the potential repercussions of the Brexit on the global economy and also to ensure that the Japanese yen stays weak.
US Advanced Q2 GDP (July 29)
Lastly, the US advanced GDP for the second quarter of the year is up for release by the end of next month. This should provide an idea of whether the Fed can still be able to hike interest rates before the end of the year or if the economy isn’t likely to be strong enough to keep growing given the Brexit.
Economic analysts have speculated that the Brexit might even trigger a global recession, and traders are looking to the head of the US central bank to share her thoughts on this possibility. However, there is no press conference scheduled after this particular announcement so traders will have to take their clues from the official statement.
Of course these are just the events that are officially scheduled on the economic calendar, which means that there might be some market-movers that could pop up out of the blue. These include speeches from government officials, an announcement from the European Commission heads themselves, or another round of surprise intervention efforts by central banks.
Source: Forex Factory (http://www.forexfactory.com/)
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