28 May 2016
LONDON, May 27 (Reuters) - Following are five big themes likely to dominate thinking of investors and traders in the coming week.
1/ HARD LABOUR
Federal Reserve officials may have been laying the groundwork for a rise in U.S. interest rates in June or July but they have always stressed that the economic data needs to support the case for a hike. Mixed numbers in the past week mean it remains an open question. The coming week sees the month's most closely followed numbers: U.S. non-farm payrolls and the unemployment rate. Economists polled by Reuters forecast 165,000 jobs were added this month after 165,000 in April and an unchanged 5.0 percent unemployment rate. But that will not be the end of it. Fed officials have made clear Britain's vote on whether to stay in the European Union, with its potential to disturb the global economy, will be a factor in their rate decision.
2/ ALL GREEK TO ECB
Greece is likely to be on the agenda in talks between European Central Bank policymakers on Thursday after a deal with creditors that paves the way for the reinstatement of a waiver to deliver cheaper funding to Greek banks. Now that Greece has passed a review of its bailout, the ECB is expected to resume accepting Greek government bonds as collateral for lending to banks within weeks, with a decision possible at the June 2 policy meeting. Either way, the ECB is also likely to be pressed this week on when it will add Greece to its quantitative easing scheme, with Athens hoping for a swift inclusion that will help it win back some favour with its austerity-weary public. With Greece also now plotting a return to markets in 2017, these developments could combine to further increase demand for Greek bonds and possibly drive yields back to a level where another comeback becomes a reality.
3/ FUELLING INFLATION
The Organization of the Petroleum Exporting Countries meets on June 2 with prices having topped $50 a barrel for the first time in nearly seven months on May 26, up some 80 percent from January's 12-year lows. While prices failed to hold above $50 the following day and OPEC is expected to rill over its current output policy, more expensive crude seems to be feeding through to higher inflation expectations. The euro zone five-year, five-year breakeven forward, closely watched by the ECB, briefly topped 1.5 percent in recent days. This remains well below the ECB's inflation target of close to 2 percent but the central bank's revised inflation and growth forecasts will be closely watched.
4/ NIGERIA'S FX RIDDLE
For years, investors have been waiting for Nigeria to devalue its naira currency. For years, Nigeria has resisted abandoning its peg to the dollar, which results in the naira being overvalued and hampering investment. Then, on May 24, the central bank said it would adopt a flexible exchange rate policy, adding more details would follow in the days to come. Investors have been sceptical about what exactly the new regime will look like, and have been cautious about the lack of endorsement from President Muhammadu Buhari.
5/ TRY TO SEE IT MY WAY
The arguments, debate and campaigning surrounding Britain's referendum on whether to leave the EU intensify as the June 23 vote draws closer. The bookmakers overwhelmingly point towards a "Remain" outcome, but the polls are much closer. Some show "Brexit" in the lead. Financial markets' view on the vote is being played out almost exclusively via sterling. The pound has bounced back strongly in recent weeks on growing expectations of a "Remain" win. But nobody is taking it for granted - the cost of hedging exposure to sterling in the event of "Brexit" has rocketed to its highest in 7 years. UK markets are closed on Monday for a bank holiday.
(Compiled by Nigel Stephenson; Editing by Hugh Lawson)
© Reuters 2016
LONDON, May 27 (Reuters) - Following are five big themes likely to dominate thinking of investors and traders in the coming week.
1/ HARD LABOUR
Federal Reserve officials may have been laying the groundwork for a rise in U.S. interest rates in June or July but they have always stressed that the economic data needs to support the case for a hike. Mixed numbers in the past week mean it remains an open question. The coming week sees the month's most closely followed numbers: U.S. non-farm payrolls and the unemployment rate. Economists polled by Reuters forecast 165,000 jobs were added this month after 165,000 in April and an unchanged 5.0 percent unemployment rate. But that will not be the end of it. Fed officials have made clear Britain's vote on whether to stay in the European Union, with its potential to disturb the global economy, will be a factor in their rate decision.
2/ ALL GREEK TO ECB
Greece is likely to be on the agenda in talks between European Central Bank policymakers on Thursday after a deal with creditors that paves the way for the reinstatement of a waiver to deliver cheaper funding to Greek banks. Now that Greece has passed a review of its bailout, the ECB is expected to resume accepting Greek government bonds as collateral for lending to banks within weeks, with a decision possible at the June 2 policy meeting. Either way, the ECB is also likely to be pressed this week on when it will add Greece to its quantitative easing scheme, with Athens hoping for a swift inclusion that will help it win back some favour with its austerity-weary public. With Greece also now plotting a return to markets in 2017, these developments could combine to further increase demand for Greek bonds and possibly drive yields back to a level where another comeback becomes a reality.
3/ FUELLING INFLATION
The Organization of the Petroleum Exporting Countries meets on June 2 with prices having topped $50 a barrel for the first time in nearly seven months on May 26, up some 80 percent from January's 12-year lows. While prices failed to hold above $50 the following day and OPEC is expected to rill over its current output policy, more expensive crude seems to be feeding through to higher inflation expectations. The euro zone five-year, five-year breakeven forward, closely watched by the ECB, briefly topped 1.5 percent in recent days. This remains well below the ECB's inflation target of close to 2 percent but the central bank's revised inflation and growth forecasts will be closely watched.
4/ NIGERIA'S FX RIDDLE
For years, investors have been waiting for Nigeria to devalue its naira currency. For years, Nigeria has resisted abandoning its peg to the dollar, which results in the naira being overvalued and hampering investment. Then, on May 24, the central bank said it would adopt a flexible exchange rate policy, adding more details would follow in the days to come. Investors have been sceptical about what exactly the new regime will look like, and have been cautious about the lack of endorsement from President Muhammadu Buhari.
5/ TRY TO SEE IT MY WAY
The arguments, debate and campaigning surrounding Britain's referendum on whether to leave the EU intensify as the June 23 vote draws closer. The bookmakers overwhelmingly point towards a "Remain" outcome, but the polls are much closer. Some show "Brexit" in the lead. Financial markets' view on the vote is being played out almost exclusively via sterling. The pound has bounced back strongly in recent weeks on growing expectations of a "Remain" win. But nobody is taking it for granted - the cost of hedging exposure to sterling in the event of "Brexit" has rocketed to its highest in 7 years. UK markets are closed on Monday for a bank holiday.
(Compiled by Nigel Stephenson; Editing by Hugh Lawson)
© Reuters 2016
