All Eyes on Carney for BoE Response to Brexit

European equity markets are expected to open lower again on Tuesday, building on Monday’s losses as investors look towards PMI data from Europe and Mark Carney’s press conference.

The Bank of England Governor, who has come under pressure over the past week to resign following his apparent one-sided intervention in the referendum campaign, is due to speak on the financial stability report this morning, potentially laying out plans to deal with any issues that may arise as a result of the Brexit vote on 23 June.

Carney has been very active since the result and has been pivotal in bringing some form of stability back to the markets. Assuming he remains in the role, he is going to continue to play an incredibly important part in helping the U.K. deal with the transition over the next few years and ensuring another crisis doesn’t materialise as a result.

Carney repeatedly warned of the risks of Brexit prior to the vote and it seems he’s taking these very seriously now that the U.K. has opted for it. Carney has already indicated that the BoE will consider cutting interest rates this summer and provide funding for banks, it will be interesting to see what else the central bank has at its disposal to deal with the challenges ahead.

We’ll get final manufacturing and services PMI data from the euro area throughout the morning followed by the U.K. services PMI shortly after the European open. None of these figures are expected to make for great reading and given that they don’t factor in the referendum result could come under much more significant pressure in the coming months.

The China Caixin services PMI, released over night, gave slightly more reason for optimism, rebounding from last month’s dip to record its fastest rate of growth in just under a year. These improvements in the services sector are all the more important at a time when the Chinese economy is transitioning away from manufacturing towards domestic consumption.

The RBA opted to leave interest rates unchanged overnight, with the central bank pointing to the decent levels of growth to justify such a move. They’ve clearly left the door open to further rate cuts if necessary with low inflation, strong Aussie dollar, an undecided election and Brexit among the number of challenges facing the economy.

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.