Three developments may occur this week which could have a massive impact on the markets.
Firstly, the Theresa May government may kick-off Article 50.
Secondly, the US Federal Reserve will probably increase US interest rates.
Thirdly, there will be an election in Holland.
The event that has the potential to have the biggest impact is the Dutch election – but only if the opinion polls get things very wrong.
The UK instigating Article 50 will garner huge publicity, just bear in mind that we have known that it was inevitable for some time – the only question mark related to precisely when. Well, this week we may know.
The fight for the UK’s prosperity post Brexit can then begin.
The markets expect US interest rates to go up later this week – the latest data on US jobs seem to have made this highly likely.
More significance will relate to what Fed Chair Janet Yellen says, and whether she drops any hints that US rates may rise more quickly than the markets expect, later this year and next.
If rates rise slowly, as expected, then the impact may not be great. But recall that after the Fed increased interest rates in the 1990s, we eventually saw the Asian crisis of 1997 and the Russian crisis of 1998. After the Fed increased interest rates earlier this decade, we then saw the crisis of 2008. If US rate at a more rapid pace than expected, which may happen if President Trump’s policies spark off higher inflation than expected, then the long term effect may be quite dramatic.
Until a day or so ago, the prospects for Geert Wilders and his PVV – that’s the party of the Far Right, in the Dutch election – seemed to be diminishing. But then a diplomatic row broke out between the Dutch and Turkish government and Turkey’s president Recep Tayyip Erdoğan accused the Dutch government of Nazism.
It is hard to say what effect this row will have on the Dutch election, but it may do the cause of Geert Wilders some good.
It is not likely that the PVV party will form part of the next Dutch government, but electorates have not been following the script expected of them, of late. In the event that PVV does especially well, then the odds of some kind of EU referendum in Holland rise, and the EU becomes less stable as a result.