After Brexit: what now?

Market movers ahead

• The UK’s vote to leave the EU has sent shockwaves through the financial markets. The focus will now shift to how politicians and central banks react in the coming days. Given these events we are revising our economic and financial forecasts, which are therefore not included in this particular edition of Weekly Focus.
• One event in focus in the coming week will be the EU summit meeting on TuesdayWednesday, which should produce an overall reaction to the UK’s decision ahead of political announcements from the UK itself and from individual countries.
• Brexit very probably takes a potential US rate hike in September off the table, so the focus on economic data will be less. PMI and consumer confidence data for June are due, but the most important figure will be for employment, which is not due until 8 July instead of the usual first Friday in the month.
• We expect to see the first positive eurozone inflation numbers since January and will also get some indication of whether ECB policy is having an impact on bank lending.
• Chinese PMI figures are expected to point towards a further modest recovery.

Global macro and market themes

• Brexit could well tip the UK economy into recession, so the Bank of England will likely ease monetary policy.
• The eurozone is also threatened by recession and we expect further easing from the ECB.  FX inflows into Denmark will push rates and yields down.
• Sweden’s Riksbank will probably cancel its planned rate hikes for next year.
• Norges Bank is now expected to cut rates twice this year.

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