Forecast - Brexit, EU Stability, Fed and China GDP Top Themes

Talking Points:

• Risk trends open with a strong rally as US benchmarks hit a record high - but the drive isn't global
• Brexit risks seem to have lessened with a new UK Prime Minister looking to take over for Cameron
• Euro-area stability is being threatened by the Italian banking system, while China GDP and Fed timing seem prosaic

See the DailyFX Analysts' 3Q forecasts for the Dollar, Euro, Pound, Equities and Gold in the DailyFX Trading Guides page.

Chief Strategist John Kicklighter discusses the top Forex fundamental themes for the coming week of trading. There are a considerable number of key themes that the market is juggling, and financial stability is at risk depending on their outcome. The most rudimentary of the themes - risk trends - was not expected to be an immediate focal point last week; but record high equity markets changed that Monday. Tracing out the fundamental lines of influence, the carry over influence of the Brexit seemed to offer some degree of relief from weeks of volatility as a Prime Minister succession seemed to have been resolved - though there are far more pressing complexities to this issue. Other themes coming to the forefront with no resolution to them included the rise of the European banking pressure (particularly in Itay); the return to China stability concerns with 2Q GDP data due Friday and the awkward position NFPs put us in for Fed rate speculation. We discussed these important fundamental themes in this week's webinar.

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