The year began with market volatility in which we saw simultaneous sharp rallies and declines, across asset classes. While we have seen some stabilization in the markets over Q2, June will be the month to watch with many key events which are set to clear market expectations for the rest of the year or at least until the end of Q3 of this year. This month might be called the month of uncertainty and volatility.


OPEC Meeting  - 2nd June 2016


The 169th ordinary OPEC meeting  will be held in Vienna, Austria and could be a turning point for crude oil prices with production freeze negotiations on the table with OPEC and non-OPEC members. Given oil prices are currently trading near $50 per barrel, OPEC members are likely to approach this meeting more positively than they did in December, when the price was around $30. Many commentators believe that the main obstacle to consensus at this meeting is Iran, which has consistently refused to freeze production.  The June meeting may indeed be a repeat of December, but even if it ends with no decision, members will likely keep the door open for further negotiations and meetings in the coming months, and continue to keep a close watch on prices. As a result, oil prices may fluctuate sharply, but within a range of $10-$15.


ECB Rate Decision –2nd June 2016


The ECB is expected to announce its rate decision on Thursday June 2nd, 2016. Currently estimates are that it will keep its current policy unchanged, with no further rate cuts and/or increases to the current QE program. It is likely that the ECB will announce details of the first targeted long-term refinancing operations to reinforce the ECB’s accommodative monetary policy stance and foster new lending. Eyes will be on the size of this TLTRO, with the remaining three to be conducted until March 2017. With no new cheap money coming into the economy directly from the ECB, we don’t expect notable weakness in the Euro though equities may face pressure.  The banking sector, however, may show some stabilization, based on the size of this program.


US Jobs Report – 3rd-June 2016


The US Jobs Report will be released on Friday. This month’s jobs report will be critical for the Fed, not necessarily on new job creation, but on the wages growth. As the Fed continues to consider a rate hike later this year, they will be looking for higher wages, which would support inflation over the medium term. The estimates are to add 163K new jobs in May, with unemployment to drop to 4.9% down from 5.0%, while the Average Hourly Earnings may rise by 0.2%. If the jobs report comes near the market estimates, this is unlikely to be a significant event for the Fed. The Fed needs a positive surprise in order to move in June.


Switzerland’s Unconditional Basic Income Vote – 5th June 2016


Citizens in Switzerland will head to the polls on a referendum on the provision of unconditional basic income to every person living in Switzerland, regardless of income or assets. The result will likely be projected before the official vote count is announced, based on early vote counts and exit polling. This event is unlikely to have a significant impact on markets.


Reserve Bank of Australia Decision 7th June 2016


The Reserve Bank of Australia is set to announce its decision on Tuesday June 7th 2016. The expectation is that they will keep the rates on hold at 1.75%. However, their dovish tone is here to stay despite the latest positive GDP figures, which in Q1 this year grew the most since 2012. Inflation and the labour market are also showing some stabilization and it is likely that AUD demand will be on the rise in June.


Reserve Bank of New Zealand – 9th June 2016


The Reserve Bank of New Zealand is set to slash its official cash rate this month by 25bps, which would be the second cut this year. This is on the back of recent economic releases which have showed some signs of slowing down. Inflation remains low, and saw the biggest QoQ decline since 1998 in Q4 of last year, while in Q1/2016 showed a slight increase of 0.17%.


Bank of Japan Decision – 15th June 2016


The Bank of Japan is set to keep the current policy unchanged at this month’s meeting. There is a slight possibility for intervention designed to weaken the Yen, particularly following the Japanese PM’s decision to delay the sales tax hike until 2019. The BoJ will not move towards increasing the purchase of bonds (8oT yen /annually), but may increase its ETF purchases. Despite that, the Japanese Yen is likely to continue strengthening in line with the recent recovery in many of the economic releases. USDJPY may test 107-106 in June.


The Federal Reserve Decision – 15th June 2016


The Federal Reserve is sending many gloomy signals over the past few months, and there is much uncertainty toward June and even the rest of the year. There has been quite a bit of positive data from the US, but there are also some negative economic releases which do not support the Fed in its intention to raise rates. More importantly, however, is that the Federal Reserve is unlikely to raise rates just days before the Brexit referendum in the UK. We believe that the Fed will keep the rates steady at this meeting, and will more likely hint at a rate hike in its next meeting. So far, the probability of a June rate hike is below 50%. Accordingly, the US Dollar may resume its downwards trend, and may retest 92.0 areas in June.


UK Brexit Referendum – 23rd June 2016


A UK-wide referendum is being held on Thursday, 23 June to decide whether Britain should leave or remain in the European Union. Polling over the last several months have not tipped the scales in any definitive direction.  Poll results, however, have been the primary driver of volatility in the British Pound and this is likely to continue until the day of the referendum. In the latest negotiations between the UK and Europe, UK Prime Minister David Cameron succeeded in securing all demands the UK government has made to remain in the European Union. The most important points are:


1- The Pound will remain the UK’s official currency. The Euro will not be recognized as the first currency in the country, unlike other EU members.


2- No Bailouts: under no circumstances will the UK banking system be involved in any financial bailout with any country within the EU.


3- No Schengen Visa: the UK will retain its visa system, with no changes. Visit visas would be required and can only be secured through the existing process and not through the European Schengen Visa process.


Ultimately, we believe that the UK will stay in the EU but retain special status. This anticipated referendum result will likely be reflected in GBP in the coming weeks and months; many are favoring GBPUSD longs with a potential target of 1.48 – 1.50 just ahead of the referendum.