Week Ahead – Brexit talks begin; RBNZ in focus; PMI data on tap; Fed speakers to be closely scrutinized

Selena Nicholas, XM Investment Research Desk

Brexit negotiations finally begin in Brussels on Monday. New Zealand’s central bank will be in focus next week while flash June PMI surveys out of the Japan, the Eurozone and the United States will also be on investor’s watch list. Various FOMC members are due to give speeches. French President Emmanuel Macron’s Republic on the Move (REM) party is set to win Sunday’s legislative elections.

Brexit Negotiations

Brexit negotiations are due to start on Monday June 19 with Brexit Secretary David Davis meeting the EU’s negotiator Michel Barnier in Brussels on Monday. In the aftermath of the UK elections which resulted in Prime Minister Theresa May losing her majority government, it would be interesting to see if her hard Brexit stance will prevail or will the UK aim for a soft Brexit.

French legislative elections

The final round of the legislative elections in France are being held this Sunday. The latest polls indicate the President Emmanuel Macron’s Republic on the Move (REM) party  is heading for a landslide victory.

Reserve Bank of New Zealand

The Reserve Bank of New Zealand (RBNZ) is due to announce its monetary policy decision on June 22. The central bank is expected to keep its benchmark rate at a record low and to stick to its neutral stance. The latest softer-than-expected first quarter economic growth would likely push the RBNZ to remain accommodative for longer. The GDP report showed the economy growing at the slowest pace since 2015 at 0.5% on the quarter. In May, the RBNZ kept the official cash rate at 1.75% and hinted it would remain on hold until at least the end of 2018. A shift in the bank’s neutral stance next week to a more positive outlook could help the kiwi bounce back after the post-GDP dip.

Japan PMI and BOJ minutes

On Wednesday, the Bank of Japan will release the minutes of its April policy meeting. The central bank kept all its policy settings unchanged at the meeting, as was widely expected. Next week’s minutes could offer some more insight. Economic data releases from Japan next week include May trade data on Monday and June manufacturing PMI on Friday.

RBA minutes and Governor Lowe speech

On Tuesday, the minutes of the Reserve Bank of Australia’s latest policy meeting will be published. At its meeting, the RBA held the main cash rate at 1.50% as was widely predicted, despite expectations of weaker growth in the Australian economy. Meanwhile, a speech by RBA Governor Phillip Lowe will be scrutinized on Monday for any clues regarding future monetary policy.

United States – Home sales and PMI

Various data on the housing sector for the month of May are due for release next week. Existing home sales are due on Wednesday while new home sales are expected on Friday. The flash Markit manufacturing and services PMI surveys for June are also scheduled for release on Friday.

A number of Fed speakers will attract attention next week for insight into the US central bank’s policy path. The FOMC meeting this week resulted in a much-expected date hike of 25 basis points bringing the fed funds rate to between 1.00 and 1.25%. The Fed was more hawkish than expected and appears on track to raise rates one more time this year. New York Fed President William Dudley will kick off a busy week of Fed speeches followed by Chicago Fed President Charles Evans. On Tuesday, Vice Chair Stanley Fischer, Boston Fed President Eric Rosengren, and Dallas Fed President Robert Kaplan are all set to speak. Finally, to end the week, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester will gives speeches.

Canada – retail sales and inflation

Canada will release April retail sales numbers on Thursday while CPI data for May are due next Friday. Inflation data are particularly closely watched by the Bank of Canada when making decisions on monetary policy. BoC Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins speaking earlier this week, suggested the central bank was starting to make the case for a modest tightening in monetary policy later this year, much sooner than many people had thought.

Eurozone PMI

June PMI data for the Eurozone next week could provide supporting evidence of a stronger economic recovery in the region. The composite PMI from IHS Markit, which comprises the services and manufacturing components, is forecast to ease slightly from May’s 56.8 to 56.7 in June. This will be a preliminary reading, so it would be important to watch.