Welcome to the Investors Trading Academy economic calendar of the week. Each week our news analysts review the upcoming economic events that you should be monitoring. Global markets have clearly begun to see anxiety creeping in as the possibility of a Brexit knocks confidence in the gains seen over recent weeks. Risk off sentiment dominated during most of the week, but things reversed later on. It’s all related to the UK’s EU Referendum which happens in the upcoming week. Apart from this, two testimonies from Janet Yellen, US Durable Goods Orders and German surveys will play a role around the big vote. These are the highlights on forex calendar. Join us as we explore the market-movers of this week.
The Federal Reserve held its monthly monetary policy meeting, deciding to keep rates unchanged amid worries about slowing job growth, but left the door open for two more rate hikes this year. The tone was relatively dovish, with concerns about the job market and no hawkish dissenters. However, the Fed grabbed the headlines only for a short while, as events related to the British EU Referendum took over. Mounting evidence for Brexit momentum pushed the pound and euro lower as the dollar and yen soared. However, the tragic murder of UK MP Jo Cox reversed some of the moves. Elsewhere, Australia´s jobs report was OK and New Zealand´s GDP beat expectations.
Many other important events are also scheduled for throughout the week, but their potential implications for investors – especially those in the UK and Europe – pale by comparison.
Meanwhile, the Chinese economy will be a major focal point, where retail sales and industrial production figures provide an idea of how its economy looks from both an export and domestic consumption perspective.
The first major event is released in the Eurozone on Monday. German economic sentiment declined unexpectedly in May to 6.4 from 11.2 in the previous month. The uncertainty around the “Brexit” issue clouded economic outlook. Analysts had forecast a score of 12.1. Meanwhile, the current situation index increased to 53.1 from 47.7 in the prior month, however the current pick-up in consumer spending is probably related to low inflation and is expected to reverse in the coming months. Investor’s confidence is expected to drop further to 5.1 this time.
On Tuesday Federal Reserve Chair Janet Yellen will testify before the Senate Banking Committee, in Washington. She may refer to the central bank’s latest decision to keep monetary policy unchanged in June. Yellen said at the press conference following the bank’s meeting, that Brexit concerns and slowing jobs report were among the reasons for the Fed’s decision to leave rates unchanged and lowering economic growth forecasts for 2016 and 2017.
The balance of the week will be on the UK. Voting begins Thursday morning with polls closing at 21:00 GMT and clear results due early on Friday. Brits will decide on whether to remain in the European Union or to leave it. While a vote to leave will not have immediate actual implications, it will certainly rattle financial markets and trigger high uncertainty. The political and economic situation in the euro-zone is at a low point: debt crises haven’t been fully solved, the refugee crisis is tearing the continent apart and confidence in Brussels is also low. A decision of the UK to leave, even if it isn’t a euro-zone member, could deal a death blow to the already fragile union, with potential damage to trade and perhaps more countries thinking of leaving. We have seen how opinion polls have moved the euro in addition to the pound in recent weeks.
Currently, polls show a momentum towards the Leave campaign with an advantage of 48% against 43%, totally different from what we’ve seen several weeks ago. However, the still close polls, the tragic murder of MP Jo Cox and the potential of undecided voters to “stick with the devil they know” are more likely to lead to a small victory for Remain. In case of a vote to leave, the euro will fall alongside the plunging pound. But also with a narrow win for staying, it will take a long time for the wounds to heal.
By Barry Norman, Investors Trading Academy – ITA
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