Its UK Referendum week!
June 20, 2016 By: alona In: Weekly Tags: Brexit GBP gold JPY UK USD


The markets were focused on the central bank meetings last week which saw the Fed, BoJ, SNB and the BoE meeting over the week. The broad underlying theme was that the central banks held monetary policy steady ahead of the UK’s referendum vote on its EU membership this week.

The Federal Reserve held the fed funds rate steady over the week, at 0.50% and did not shift its economic outlook significantly. The FOMC’s dot plot still showed two rate hikes in 2016, although the markets are pricing in only one. On the economic growth, the Fed’s forecasts showed that the US economy would grow at a pace of 2.0% in 2016. During the press conference, Fed Chair, Janet Yellen said that the FOMC committee considered the risks of Brexit in its meeting.

The Bank of Japan also held monetary policy steady this week, which sent the yen surging higher on both the policy inaction and the risk to safety. USDJPY fell to 104 lows before managing to stabilize later in the day. The BoJ is expected to move in July where aggressing policy easing is being expected.

The SNB and the BoE also struck similar tones, leaving policy unchanged. The SNB in particular mentioned that the central bank was watching the Brexit referendum vote and that any rapid appreciation in the Swiss Franc could result in intervention from the central bank.

On the economic front, data was relatively positive. In the US, inflation moderated in May but retail sales managed to hold on to its gains, rising for the second consecutive month. The data beat forecasts as well, rising above estimates. In the UK, the monthly jobs data showed the unemployment rate falling to 5.0%, marking a 10-year low. Wage growth also picked up strongly in the three months ending April. Retail sales were also positive, rising to 6.0% on a year over year basis, indicating that UK consumers shrugged off the Brexit risks. The better than expected retail sales data is likely to see the second quarter GDP rise steadily.

Amidst the turmoil, gold prices continued to extend their gains, breaking above $1300 handle to post a new yearly high to $1315 before pulling back on Thursday.

 

XAU_180616Gold Futures for Aug’16 delivery ($1301.60), 18/06/2016

Next Week: Currency Markets

The week ahead is light in terms of economic data. From the Eurozone, the markets will be focusing on the flash PMI numbers coming out over the week. French GDP data is also expected to show that the economy grew at a pace of 0.60% over the first three months of the year.

In the UK, economic data is quiet but the June 23rd referendum vote will be closely watched. So far, opinion polls have managed to give the ‘Leave’ camp a significant lead but anything could happen at the polls. The GBP remains a risk due to the referendum results.

In the US, Fed Chair, Janet Yellen will be testifying to US congress on Tuesday and Wednesday which will be the main event risk for the US dollar. However, given the short time frame after the FOMC meeting, Janet Yellen is unlikely to offer anything new to the markets, especially given the Brexit referendum vote just around the corner.

Economic Calendar – Key events

Date

Time

Currency

Detail

Forecast

Previous

20-Jun

00:01

GBP

Rightmove HPI m/m

0.40%

00:50

JPY

Trade Balance

0.13T

0.43T

07:00

EUR

German PPI m/m

0.40%

0.10%

11:00

EUR

German Buba Monthly Report

13:30

CAD

Wholesale Sales m/m

0.20%

-1.00%

15:30

AUD

CB Leading Index m/m

0.10%

21-Jun

00:25

AUD

RBA Assist Gov Debelle Speaks

00:50

JPY

Monetary Policy Meeting Minutes

02:30

AUD

Monetary Policy Meeting Minutes

AUD

HPI q/q

0.80%

0.20%

05:30

JPY

All Industries Activity m/m

1.30%

0.10%

07:00

CHF

Trade Balance

2.88B

2.50B

Tentative

EUR

German Constitutional Court Ruling

09:30

GBP

Public Sector Net Borrowing

9.5B

6.6B

10:00

EUR

German ZEW Economic Sentiment

5.1

6.4

EUR

ZEW Economic Sentiment

15.3

16.8

11:00

GBP

CBI Industrial Order Expectations

-10

-8

15:00

USD

Fed Chair Yellen Testifies

23:45

NZD

Visitor Arrivals m/m

-1.10%

22-Jun

01:30

AUD

MI Leading Index m/m

0.20%

04:00

NZD

Credit Card Spending y/y

9.10%

10:00

CHF

ZEW Economic Expectations

17.5

Tentative

EUR

German 30-y Bond Auction

0.88|1.4

Tentative

EUR

Long Term Refinancing Option

7.3B

13:30

CAD

Core Retail Sales m/m

-0.30%

CAD

Retail Sales m/m

-1.00%

14:00

CHF

SNB Quarterly Bulletin

CNY

CB Leading Index m/m

0.10%

USD

HPI m/m

0.60%

0.70%

15:00

EUR

Consumer Confidence

-7

-7

USD

Fed Chair Yellen Testifies

USD

Existing Home Sales

5.53M

5.45M

15:30

USD

Crude Oil Inventories

-0.9M

23-Jun

03:00

JPY

Flash Manufacturing PMI

48.2

47.7

08:00

EUR

French Flash Manufacturing PMI

48.8

48.4

EUR

French Flash Services PMI

51.5

51.6

08:30

EUR

German Flash Manufacturing PMI

52.1

52.1

EUR

German Flash Services PMI

55

55.2

09:00

EUR

Flash Manufacturing PMI

51.4

51.5

EUR

Flash Services PMI

53.2

53.3

09:15

AUD

RBA Assist Gov Debelle Speaks

All Day

GBP

UK EU Referendum Vote

13:30

USD

Unemployment Claims

271K

277K

14:00

EUR

Belgian NBB Business Climate

-2.9

-2.8

14:45

USD

Flash Manufacturing PMI

50.5

50.7

15:00

USD

New Home Sales

561K

619K

USD

CB Leading Index m/m

0.20%

0.60%

24-Jun

00:50

JPY

BOJ Summary of Opinions

JPY

SPPI y/y

0.10%

0.20%

09:00

EUR

German Ifo Business Climate

107.6

107.7

EUR

Italian Retail Sales m/m

0.20%

-0.60%

09:30

GBP

BBA Mortgage Approvals

37.9K

40.1K

13:30

USD

Core Durable Goods Orders m/m

0.10%

0.50%

USD

Durable Goods Orders m/m

-0.80%

15:00

USD

Revised UoM Consumer Sentiment

94.2

94.3

USD

Revised UoM Inflation Expectations

2.40%

*Time: UK (GMT+1)

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