Investors will learn tomorrow night, Sydney time who the new British prime minister is – it is expected to be Boris Johnson, the face of the Leave campaign in the 2016 Brexit referendum. He is widely believed to have won the vote of Conservative Party members in the six-week-long campaign to become the UK’s new leader
Johnson is expected to have beaten foreign minister Jeremy Hunt to succeed Theresa May.
Voting in the leadership race concluded on Sunday, and results are expected on Tuesday (and will be leaked before then) and a new prime minister will be in place by the end of the week.
The pound sterling has sunk to its lowest in 27 months as the two candidates tried to outdo each other with hard Brexit urgings, including pledges to leave the EU with or without a transition trade deal, at the October 31 deadline.
The UK economy is fading, recession looms and if there is a hard Brexit, then the currency will tumble further, Scotland will move closer to a second referendum to leave the union with England and Northern Ireland will become fraught with tension on the question of a border with Ireland in the south which will remain a part of the EU.
The EU has already warned it will not give any more concessions to the UK on the departure question and that will be doubly so if the new PM is Johnson who is widely blamed for whipping up anti-EU passions in England.
Meanwhile, a rate cut is tipped to emerge from Thursday’s meeting of the European Central Bank as inflation across the group remains persistently low.
And even if the ECB doesn’t go that far, AMP Chief Economist, Dr. Shane Oliver says the central bank could signal an easing in monetary policy based on some combination of dovish forward guidance on rates, rate cuts, and a new quantitative easing program.
Eurozone business conditions surveys for July (out Wednesday) are likely to show further signs of stabilisation after the falls early this year. Those surveys will play into the ECB decision
In Australia there are speeches by the RBA’s Assistant Governor, financial markets Chris Kent (Tuesday) and governor Phil Lowe (on Thursday) will be watched for clues on rates, but the bank is now in the lead up to a new set of forecasts in the third Statement on monetary policy to be released in early August.
There are some more quarterly production reports from mining companies – Fortescue Metals will be a notable reporter. June 30 results remain scattered – Australian Foundation Investment Co, Australia’s largest listed investment company – reports tomorrow and stablemate Amcil the day after.
The US there could be progress with Donald Trump’s various trade wars – perhaps with news of progress with China, while the rising level of tensions in his brawl with Iran will start grabbing more attention, especially with the Iranians taking control of two UK-flagged tankers in reply to the Brits grabbing an Iranian tanker near Gibraltar 10 days ago.
As well, the first estimate of US June quarter GDP is due Friday and is expected to show a slowing in growth to around 1.8% annualised from 3.1% in the March quarter.
But watched for stronger retail and consumer activity and business investment which will offset any fall in headline growth.
US house prices are out on Tuesday, along with existing home sales with new home sales data out the next day, along with the flash July business activity survey details.
June quarter earnings reports ramp up with the likes of Facebook, Amazon, and Alphabet (Google) dominating.
