Markets

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.

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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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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