Everyone should worry about no deal Brexit

Today's Highlights

• No deal Brexit concerns rise as next PM candidates are "prepared" for this event

• Asian markets fall as strong US employment data could suggest interest rate cuts

 

Current Market Overview

No deal Brexit concerns rise as next PM candidates are "prepared" for this event

Everyone should worry about no deal, the civil servant who was, until March, head of the Brexit department has said. Philip Rycroft, who resigned after 18 months, told the BBC's Panorama no deal was "fraught with risk". Both the candidates in the race to replace Theresa May as prime minister - Jeremy Hunt and Boris Johnson - have said they would be prepared to leave the EU without a deal.  The pound is unlikely to rally until we have some clarity around Brexit.  Disappointing UK data last week also weighed on Sterling as all of the PMI’s came in much worse than expected. We await manufacturing data and May GDP in Wednesday, these will be closely watched as there is a risk that the UK may have stagnated in the second quarter.

Asian markets fall as US employment data could suggest interest rate cuts

Asian markets tumble broadly, partly as reactions to Japan’s export controls on certain Korean semiconductor materials. Also, the weakness is partly due to adjustment in expectations on Federal Reserves rate cut this month, after Friday’s solid US job data. Though, the currency markets are steadily mixed. The Dollar is weaker, paring some of last week’s gains. The greenback’s fate will very much depends on Fed Chair Jerome Powell’s testimony and FOMC Minutes scheduled for the week.

ECB Governor Council says Central Bank could launch fresh stimulus

European Central Bank Governor Council member François Villeroy de Galhau hinted that the central bank could launch fresh stimulus before IMF Managing Director Christine Lagarde takes over Mario Draghi’s job as ECB President. He noted that “If we speak about monetary policy we have several Governing Councils to come, in the next month, including with Mario Draghi. And if and when needed, there must be no doubt about our determination to act and our capacity to act.” Villeroy said policymakers look at the market, but emphasized “we are not market dependent, we are data dependent”. And, “if we look at the economic signals there is a continuing slowdown but there also significant wage increases.

Bank of Canada to leave policy rates unchanged

The Bank of Canada is expected to leave the policy rate unchanged at 1.75% this week, and for the rest of the year. Data flow since the last meeting has remained resilient, offering the central bank more room to take a wait and see mode and assess the economic developments.