The following article is based on research by Marshall Gittler, Head of Investment Research for FXPRIMUS.
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FXPRIMUS Indicators and events for the week beginning 27 June: Final PMIs, EU CPI, Japan Tankan, Australia election
There’s a pretty full schedule of indicators out this week, but I wonder if any of them will matter? I expect that the aftershocks from the Brexit vote will dominate the market, rather than the fluctuations of economic indicators. There’s a clear “risk off” mode dominating the markets now and I would expect that sentiment to dominate for now.
Because of that, politics, not economics, will dominate the markets. The immediate focus will be on when the UK will formally notify the EU that it’s withdrawing. The British side want to wait until they elect a new PM, but the EU wants to start negotiations immediately. There will be several meetings of EU leaders to discuss the issue. Meanwhile, everyone will be waiting for the leaders of the “Leave” side to disclose their plans, but they don’t seem to have any. To make matters worse, the opposition Labour Party is disintegrating, with almost half (12 out of 30) the leadership resigning. The only well-organized people on the UK side are the Scots, who are preparing to leave the UK and join the EU as an independent country.
Investors will also be watching for central bank activity. The Swiss National Bank (SNB) was said to have intervened on Friday. Will the Bank of Japan (BoJ) come in as well? And what, if anything, will the Bank of England do?
Against that background, the usual indicators fade into unimportance, particularly for the UK.
Globally, the main indicators will probably be the rest of the PMIs, including the ISM index from the US. The most closely watched ones will probably be the Chinese PMIs on Friday. They’re expected to show little change.
In the US, the markets will be watching the final revision to US Q1 GDP, US personal income & spending, and the ISM index.
For the EU, the focus will be German CPI on Wednesday, followed by EU CPI the next day. However, the modest acceleration in inflation that’s expected will be nowhere near what would be necessary to have an impact on monetary policy.
In Japan, the key time will be Friday morning (Japan time), when many of the usual the end-month figures are released, including the key CPI data. At the same time the Bank of Japan will release its quarterly Short-Term Survey of Economic Conditions (Tankan). This is the biggest economic indicator from Japan and is sure to be market-affecting. It’s expected to show a continued downturn in business sentiment.
As for the central banks, there will be many speakers at the ECB’s 3-day forum in Portugal Monday through Wednesday. The main event will be a panel discussion Wednesday with ECB President Draghi, Fed Chair Yellen and Bank of England Gov. Carney.
Finally, Australia has a federal election on Saturday.