The Week Ahead:
The week that has been shaping up as the most pivotal of the year and longer for generations of Britons to come is upon us. Whilst there are significant data and other events in the early stages of the week it is impossible to avert attention away from the looming British EU membership vote on Thursday. The repercussions of the “Brexit” vote will be both wide-ranging and and have significant impact on the global economic environment.
Global markets including Australia and New Zealand are all braced for the outcome and the impact on currency market volatility will likely be amplified as investors seek to square off positions ahead of the vote. The Bank of England will also be continuing its efforts to shore up the stability of the financial sector in the lead-up to and aftermath of the vote.
With the vote appearing to be riding on a knife-edge it is difficult to predict what the eventual outcome will be. The enormity and significance of the vote was however alluded to by US Fed Chair Yellen recently when the Brexit vote was cited as a contributing factor to the rates on hold decision at the June Fed meeting. Either way the outcome of the vote will no doubt trigger heated political and economic debate in the UK, Europe and beyond.
The AUD has opened the week pushing back above 0.7400 USD and we are expecting volatility to be significant throughout the week ahead against all of the major currencies. This week RBA Assistant Governor Debelle is scheduled to speak twice and as always the speech transcripts will be analyzed for any clues regarding the RBA’s future policy position. The meeting minutes from the June RBA meeting will be released on Tuesday adding further comment to the rates on hold outcome. House price data will also be released on Tuesday following the RBA minutes and will also be closely watched and commented on in the closing stages of the marathon campaign for the July 2 federal election. New Zealand data this week is limited to consumer sentiment figures on Monday and visitor arrivals data on Wednesday.
US Fed Chair Yellen is due to provide testimony this week over two days to the Senate Banking Committee in regard to the Semiannual Monetary Policy Report. The timing of this testimony is of particular interest in light of the June Fed meeting and the continued speculation of at least one rate rise in the US this year. US unemployment data, manufacturing and home sales figures will also be released this week with the UoM Consumer Sentiment and Inflation Expectations to round out the week.
As if the looming Brexit vote is not enough for the euro zone this week the German Constitutional Court is also scheduled to hand down its findings regarding the constitutionality of the EC B’s Outright Monetary Transactions Policy. This could have significant repercussions for the ECB’s quantitative easing program. German and euro zone economic sentiment data is also due for release this week as well as the German Bundesbank Monthly Report. Flash manufacturing data is also scheduled for the two largest euro zone economies (Germany and France) as well as the for the region as a whole.
Chinese data this week is limited to the release of the CB Leading index on Wednesday. Japanese focus will be on trade data, manufacturing PMI, and the BOJ monetary policy meeting minutes and Summary of Opinions.
So, all in all the week ahead is likely to see increased volatility in currency markets remain with Britain, the EU and the wider global economic community sweating on the result of the Brexit vote. There is unlikely to be a more pivotal or significant week this year for the global economy. By week’s end the global economic landscape could be changed significantly with ramifications, good and bad, to be felt for many years to come.