World events this week could influence markets
Brexit may begin, the Fed board meets and the Dutch go to the polls.
Investors around the world are bracing for a series of events this week that could potentially cause waves in markets.
From the expected launch of Britain’s exit from the European Union to the Federal Reserve’s discussion of another interest rate hike, there’s a lot that could cause volatility and even put a brake on the so-called Trump Bump, the monthslong rally in stocks following the election of President Donald Trump.
“This week is most unusual from a macro point of view as there is a heavy concentration of ‘event risk,’” said Neil MacKinnon, global macro strategist at VTB Capital.
Here are a few of the biggest events.
Brexit could become a binding, irreversible fact this week.
Since Britain voted to leave the EU last June, nothing happened apart from a sharp fall in the pound. But that period of calm is due to end, with the government expected to trigger, as soon as Tuesday, the formal process by which the country leaves the bloc it’s been part of since 1973.
Triggering the so-called Article 50 of the EU treaty begins two years of divorce negotiations. They will focus on how Britain leaves the bloc and on creating a new trade deal with the EU, its main export market.
It’s unclear how big the market reaction may be to the announcement of the Article 50. Traders will have come to expect it to happen eventually, which could mean the pound doesn’t drop too sharply on the day.
In the longer-term, however, it means British markets will be subject to a daily barrage of headlines on how the negotiations are going.
“It will prove challenging for the government to manage expectations over a two-year period, and negotiating setbacks may be reflected in heightened financial market volatility,” said James