The week following the UK’s decision to quit the European Union has of course been busy with a heavy political agenda of unscheduled meetings among the business leaders and policy makers. Investors are now expecting new fiscal measures to be quickly implemented in order to counter a potential economic slowdown following the Brexit vote.
The Bank of England Governor Mark Carney hinted at a lower bank rate in his speech on Thursday, stating that ‘some monetary policy easing will ‘likely be required over the summer’. The activity on the Gilts market suggests that the market gives a decent 85% chance for an interest rate cut to happen by November this year.
GBP/USD and EUR/GBP will be interesting FX pairs to watch in the coming week.
Traders’ attention will shift to the US next week. The FOMC meeting minutes and US jobs data are both on the agenda and should give a fresh direction to the US dollar, which has strengthened following the Brexit referendum, as investors looking for safety moved their cash into the US dollar.
The US jobs data will also be in focus of course. Last month’s non-farm payrolls read was a decent disappointment, with the US economy adding only 38’000 jobs in May. The consensus for June’s NFP print is 180’000K.
Finally, gold has been among the biggest beneficiaries following the Brexit decision. We expect a lift towards the $1400 mark in the mid-run.