Stock Markets are holding

Stock markets held their nerve so far this week as investors braced themselves for the highly-anticipated outcome of the US Federal Reserve’s policy meeting and the latest round of US-China trade talks. 

Investors are largely looking ahead to a packed diary of political and economic events. Tuesday sees the start of the latest round of negotiations between US and Chinese officials in Shanghai aimed at alleviating trade tensions between the world’s top two economies.

The BoJ maintains Interest Rates unchanged

The BoJ maintained its interest rate unchanged at -0.10% as it was expected. Also, the bank did not change the forward guidance on interest rates(maintain an ultra-lose policy until the spring of 2020). It should also be noted that the bank lowered its forecast for the medium core CPI rate for 2019at +1.0% yoy (previous forecast was +1.1% yoy). However, inflation is expected to gradually accelerate towards +2.0% yoy. The BoJ also mentioned that the it sees risks ‘skewed to the downside for the economy and it won’t hesitate to take additional easing if momentum goes down.’

GBP falls to 2017 levels against the USD

Cable continued its move down yesterday, reaching the lowest level since March 2017. Risks of a hard Brexit are putting pressure on the pound as the new UK government hardens its stance towards the EU. It should be noted that the UK Government does no longer work under the assumption of an orderly withdrawal from the EU. According to media, Boris Johnson is not willing to restart talks unless the EU agrees to reopen the divorce deal which had been struck with Theresa May (even though he believes the last deal is no longer feasible). Also, the Irish backstop continues to form a substantial obstacle in agreeing Brexit.

Other economic highlights, today and early tomorrow

Today during the European session, we get Germany’s GfK consumer sentiment indicator for August, Eurozone’s industrial sentiment as well as the areas consumer confidence (final), both for July. Late in the European session, we get Germany’s preliminary CPI rate for July. From the US in the American session, we get the personal consumption rate, as well as the core PCE price index, both for June. Also in the American session from the US, we get the CB consumer confidence indicator for July, the pending home sales rate for June and late in the American session, we get the API weekly crude oil inventories figure. Tomorrow during the Asian session, we get China’s NBS manufacturing PMI for July and a bit later Australia’s CPI rate for Q2, which could provide volatility for the Aussie. Please bear in mind that the US- Sino trade negotiations are to restart today. The two sides until now seemed less willing to actually make concessions in order to strike a deal, or show some progres, yet on the other hand both economies seem to need such an agreement, in order for trade relations and terms to start normalizing.

GBP/USD Daily

USD/JPY H4

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