Last week volatility in the market was very high, due to a lot of economic and political news. Last week, the price of crude oil prices Brent has rapidly declined from the annual highs of 52.80 USD per barrel, causing the strengthening in the Cad against the USD. Inactivity of the US Fed and the Bank of Japan, which kept their monetary policies unchanged, as well as comments of the Central Banks’ representatives led to the decline in the USD and strengthening in the Yen and increasing demand for gold, as safe haven assets. Forthcoming referendum on Bretix also has its effect.
Market mildly responded on the decision of the SNB to leave monetary policy in the country unchanged. Market’s reaction on the decision of the Bank of England to keep monetary policy unchanged was similar. However, the attack on the Deputy of the British Parliament, Mr. Joe Cox, who later died in the hospital, has triggered strong reaction. Joe Cox was a known supporter of keeping membership of the UK in the European Union, and the attacker was a supporter of the radical party, which advocated exit of the UK from the EU. After this tragedy the Governor of the Bank of England Mr. Mark Carney canceled his speech on Thursday after the meeting of the Bank of England and the release of the minutes of the previous meeting where interest rate decision was adopted.
There was an opinion in mass media that this event may increase the number of supporters of the UK’s membership in the EU. GBP/USD and EUR/USD strengthened significantly on Friday, causing the rise in the Euro and the Pound against the USD last week. On the weekly charts of these currency pairs pin-bars has been formed, which, from a technical point of view, can trigger further growth in the pairs. However, a crucial role in the movement of the Euro, the Pound and the European stock indices, and generally in the market this week will depend on the referendum in the UK, which will held on 23 June at 22:00 (GMT 2), and the results of which will be announced on Friday at 04:00 (GMT 2). The results of the recent polls indicate growing number of supporters of the country's exit from the EU.
However, according to the recent polls, conducted this weekend, membership of the UK in the EU is supported by a larger number of respondents in the UK compared with those who support country's exit from the European Union. With the opening of the trading day on Monday, the Euro and the Pound went up with a gap 28 and 113 points, respectively.
However, there are two opinions about possible developments of the market reaction on this event. First of all, exit of the UK from the EU may provoke a powerful reallocation of funds in the financial markets involving, a serious shock in the global financial system and the economy and creating a new economic crisis. The price in the Yen, gold, Swiss franc, the US dollar can sharply go up. British GDP may sharply go down, increasing unemployment as causing decline in living standards.
According to the second opinion, market’s reaction can be milder than expected, as although the UK is one of the leading financial centers of the world, it does not have as powerful economic influence, as Chine, for example.
The most important news of this week is as follows:
01:25 (GMT 2) – a speech by the Deputy chairman of the RBA, Mr. Debelle.
01:50 – meeting of the monetary policy Committee of the Bank of Japan.
03:30 – housing price index and minutes of the last meeting of RBA.
06:30 – index of activity in all economic sectors of Japan, excluding financial sector. This index is the leading indicator of the workforce productivity for April.
11:00 – ZEW index of business sentiment in Germany, ZEW index of economic sentiment assessing sentiments of the financial investors in June, ZEW index of business sentiment in Eurozone for June.
15:00 – speech by the head of ECB, Mr. Mario Gradhi.
16:00 – speech by the head of the US Fed, Mrs. Janet Yellen.
22:30 – American Petroleum Institute (API) will release report on changes to the oil reserves in the USA for the last week.
Meeting of ECB, publication of LTRO program to support liquidity of the banking system of Eurozone.
15:00 – housing price index in the USA for April.
15:00 – quarterly report of SNB for Q2.
16:00 – speech by the US Fed, Mrs. Janet Yellen.
16:30 – US Department of Energy will issue weekly report on the US oil inventories in the warehouses.
Referendum on the UK’s membership in the EU will be held.
01:05 – British consumer confidence by Gfk Group for June, which is a leading indicator, reflecting the level of consumer confidence in economic activity. Positive index will indicate economic growth in the country and will be favourable for the GBP and Vice versa.
07:00 – the index of leading/coincident indicators, which tracks current state of the Japanese economy in April.
09:30 – preliminary data on business activity index (PMI) in economic various sectors of Germany for June, including manufacturing index (PMI), which is an important indicator of business conditions and of the general state of German economy.
10:15 - speech by the Deputy chairman of RBA, Mr. Debelle.
14:30 – 16:00 – important US macro-economic statistics, including the number of initial applications for unemployment benefits, preliminary data on business activity indices in various sectors of the American economy (PMI) for June. Leading indicators, estimating future economic development and stability of the American economy as a whole (state of the labor market, permits to construct, price of the securities and the yield of bonds) in May, sales of new homes in the USA for May.
Outcome of the referendum in the UK will become known.
10:00 – indicators, assessing current state of the German economy, index of business optimism and economic expectations in June.
14:30 – number of orders for durable goods in the USA for May, which provides for large investments. In case of the negative index, the USD will decline.