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In the markets: What to watch this week

With the stock market and South African currency in much of a sideways range last week, most of the action took place in commodities, but with the Bank of England (BoE) Monetary Policy Committee making decisions on Thursday, the market is certainly on its toes.

The latest bits and pieces of data, which include the effects of Brexit, or ‘post-Brexit’, came out last week in the form of business confidence and consumer confidence for July.

Business confidence dropped to a low not seen since 2009 while consumer confidence dipped to a 2014 low. The markets didn’t react much because the post-Brexit shock has already been priced in even though it was the biggest drop in consumer morale since 1990 when Margaret Thatcher was prime minister and the interest rates rose to 15%.

By contrast the BoE is likely to cut rates to a record low of 0.25% on Thursday in an effort to stimulate an economy suffering from low growth and low inflation.

The future trajectory of the BoE’s monetary policy depends on whether Britons enter a new period of damaging economic uncertainty or restore confidence by embracing a positive stance on negotiating a new deal for the UK.

Corporate activity slowed at its fastest pace since early 2009 and economists said this month it was likely that Britain would fall into recession in the coming year. Official figures showed that Britain’s economy grew 0.6% in the second quarter that lead up to the vote.

Across the Atlantic, the US economy seems to be maintaining a slow but steady growth. The comprehensive and official Non-Farm Payroll data will be hitting headlines on Friday, which gives an in-depth view of the labour market and is preceded by ADP Non-Farm Payrolls on Wednesday.

From South Africa we have Barclays PMI Manufacturing and Standard Bank PMI on Monday and Tuesday respectively. On Friday we hope to see an increase in foreign exchange reserves, which seemed to have bottomed out end of last year on the back of a weak rand.

Other economic announcements due this week:

Monday

• CN Manufacturing PMI official and Caixin
• SA Total New Vehicle Sales
• US ISM Manufacturing PMI

Tuesday

• JP Consumer Confidence
• US PCE Price Index

Wednesday

• EA ECB Non-Monetary Policy Meeting
• US ISM Non-Manufacturing PMI

Thursday

• CH Consumer Confidence

Friday

• ID GDP and Business Confidence
• US Balance of Trade

Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers. Click here to visit the firm’s website.

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