We lived a historical day on Friday, following the EU referendum that has as a result UK to leave the European Union and the British Prime Minister David Cameron to stand down in October. The UK will start negotiations for the details of the historical exit that is expected to take about two years.
The market will need some time to digest these developments, settle down and determine its direction after many assets experienced roller-coaster moves. Friday was the worst day ever for the British sterling. The GBP/USD plunged at its weakest level in three decades. The last time we have seen a similar reaction was Black Wednesday when UK government was forced to withdraw pound from the European Exchange Rate Mechanism (ERM) in September 1992. However, Brexit is expected to be worse.
Many economic indicators are coming out this week, however, the Brexit will overshadow the majority of them and erase their impact in the market.
On [B]Monday [/B]morning Eurozone’s private loans and the M3 money supply for May will be released. In U.S., out of the goods trade balance for May the preliminary Markit services PMI for June will be watched. However, the most important announcements of the day are the publication of the “Bank Stress Test info” by the Board of Governors and the Federal Reserve System and the speech of ECB President Mario Draghi later in the day. The market participants will hang on every word as they expect him to comment on the changes that are coming up for the other European countries and for UK after Brexit.
On [B]Tuesday[/B], the U.S. will release its final GDP growth for Q1 which is expected to have risen up to 1.0% annualized versus the preliminary figure of 0.8%. The personal consumption expenditures prices for Q1 are also expected to be released. June’s consumer confidence is forecasted to increase to 93.7 from 92.6 in May. The API weekly crude oil stock will be announced as well.
Going to [B]Wednesday[/B], in UK, the nationwide housing prices will be released followed by mortgage approvals for June and May respectively. In Eurozone, several indicators for consumer, services, industrial and business confidence will be published. In Germany, the flash inflation rate for May will be released, no forecasts are available yet. Later in the day, the U.S. personal spending is predicted to show a slashed growth of 0.4% in May versus 1.0% before, while personal income is expected to have risen just by 0.3% compared to an increase of 0.4% prior. The pending home sales for May will follow with analysts’ forecasts expect then to decline 1% from an increase of 5.1% in April. Crude oil inventories change will be released. In UK, the Gfk consumer confidence for June will be watched as it includes the days before the historical EU referendum that sent UK out of the union. Overnight, Japanese flash industrial production and New Zealand’s business confidence both for May will draw traders’ attention.
On [B]Thursday[/B], early in the morning, the German retail sales for May and a while later the German unemployment rate for June will be released. In UK, the final GDP for the first quarter will be released but no changes are expected to the earlier figures, 0.4% qoq and 2.0% yoy. The business investment indicators and the index of services are also coming out. Eurozone’s flash inflation rate for June is coming out. ECB monetary policy meeting accounts will be released and closely eyed by investors. The U.S. weekly jobless claims will be out as usual and a speech from Fed’s Bullard will follow. In Canada, April’s GDP will be released while in Japan, the consumer price index and the unemployment rate for May will come out over the night.
Going to [B]Friday[/B], it is a Markit day. June’s Markit manufacturing PMIs for Eurozone as a whole, U.S., UK and Germany will be released. Eurozone’s unemployment rate is also scheduled for publication as well as the U.S. ISM manufacturing index for June and the construction spending for May which will be released during the afternoon. In addition, May’s construction spending is expected.