The major driver this week has been….. drum roll please….. Brexit! But not Brexit itself, more the propensity for UK macroeconomic indicators to fly in the face of the ‘doom and gloom’ warnings that have hitherto dominated the headlines post-referendum.

On Tuesday, we saw a raft of UK inflation and retail sales prints smash expectations, showing that sentiment has not been impacted nearly as much as many had forecast. This is all good, right? Well, it hasn’t been that great for the UK 100 this week. Why? Because such a show of economic strength means that the Bank of England is now less likely to add to its stimulus package in the near future. With equity markets having more or less priced in an ‘even easier Autumn,’ it looks as if they might have to make do with merely an ‘easy Autumn.’

There’s one factor at play that isn’t to do with Brexit though, which could also prove key to the direction the UK blue chip index will take next week. That is, of course, the US Federal reserve and what markets think it will do about US interest rates. Desperate to temper the markets’ out and out bullishness, Fed speakers this week have been on a hawkish offensive. Right now these are just words, but will they translate into actions? Importantly, if they don’t, then the correction we’ve seen this week may turn out to be a dip on which to buy ahead of the impending rally.

On the other hand, we could be set for more downside if markets really do decide that the easier Autumn is not going to be forthcoming. Clearly, this will depend almost exclusively on the data from the UK and US that’s due out next week. In the latter case, this is something the US Fed constantly alludes to, insisting that any decision to raise US rates must be supported wholeheartedly by the data.

Next week sees some really important data releases that will give vital insight into the US jobs, housing and oil markets, its manufacturing industry and GDP as well as a speech by Fed Chair Janet Yellen – potentially market moving stuff, I’m sure you’ll agree! From the UK we’re going to get more retail and wholesale data and its own all-important GDP print. There’s a host of data from Europe too.

Next week’s UK and US data prints are highly likely to dictate the direction of the global indices via their effects on currencies and investor sentiment. These data prints and their effects on the markets aren’t always that simple to analyse. That’s why we’ve got a crack team of analysts to do  it for you. Don’t be left out in the cold – get yourself signed up for our comprehensive research offering and we’ll keep you updated.

Have a great weekend!

Amrit Panesar, Senior Trader (19 Aug)