“Brexit”, “Bremain”, “Bregret” – no doubt all worthy candidates for 2016 word of the year and likely to be added to the dictionary for evermore. With both bookmakers and financial markets alike predicting that the UK would remain in the EU, reverberations from last week’s stunning result have only just begun. Time will no doubt tell whether the outcome of the referendum is a masterstroke or mistake for the UK or even more simply a party political stunt gone catastrophically wrong. What is unarguably clear, however, is that the economies and financial markets of the UK, Europe and globally will need to adapt swiftly to this unexpected change in the geo-political spectrum. The analysis of how it all came to this will continue unabated raising ongoing and in some parts festering issues of social, generational, economic and class divides.
The impact of the vote result was swift and ruthless on the GBP as it fell to more than 30-year lows against the USD. The arrival of the weekend provided the GBP with some breathing space and time for reflection ahead of the new week and the start of what is likely to be a period of intense volatility for the GBP in particular and global currency markets in general. The GBP has continued to sink lower in early Monday trade.With the change in the UK landscape it will be interesting to note British consumer confidence, GDP, manufacturing PMI and business investment figures due for release this week as the final data in the series pre-EU referendum decision.
Australia is heading to the polls on July 2 for the federal election as the marathon campaign period draws (stutters, crawls?) to a close. The AUD has opened the week above 0.7400 USD after taking its own rollercoaster ride following the UK vote and may be in for a topsy-turvy week as financial markets open again. Pre Brexit vote the AUD was above 0.7600 USD before tumbling to 0.7300 USD. It is a relatively quiet Australian data week ahead of the federal election with new home sales, private sector credit, manufacturing and commodity price data due for release. The election result and UK vote fallout will, however, ensure that next week’s RBA meeting will be one to watch very closely.
New Zealand data this week is sporadic with trade balance on Monday and building consents and business confidence figures released on Thursday. Chinese manufacturing data will be eagerly anticipated on Friday alongside key Japanese price measures and manufacturing data as we kick-off the month of July.
Significant US economic data continues to be released this week with GDP, consumer confidence, Personal Consumption Expenditure Price Index ( a favourite US Fed price measure), personal income and unemployment all highlights. Bank stress test results are also due for release in the US this week and the timing could not be better considering the financial sector fallout emerging from the UK.
European data is also coming thick and fast this week alongside the most recent ECB monetary policy meeting accounts. Price data, manufacturing, unemployment and retail sales figures will all be released this week. With last week a week like no other before it this week promises to be full of intrigue and volatility as the world reacts to the seismic shift within Europe.