Markets anxiously counted down to a busy central banking week ahead. Investors have zero doubt the U.S. Fed will cut interest rates for the first time in more than a decade.
It’s going to be a busy central banking week. The BOJ and Fed meetings will be followed by the Bank of England on Aug 1. It is expected to keep interest rates on hold as policymakers wait for the Brexit fog to clear.
U.S. central bankers are expected to lower borrowing costs this week for the first time since the depths of the financial crisis. The Fed is expected to trim the key interest rate by at least 25 basis points (bps) at its July 30-31 meeting. Investors will also look for signals of likely additional cuts in the pipeline. Such a move is widely seen as a pre-emptive one to protect the economy from global uncertainties and trade pressures.
Meanwhile, U.S. and Chinese trade talks are shifting to Shanghai this week. Negotiators from both countries meet for their first in-person talks since a truce at G20 last month. Expectations are low for a breakthrough. Data on the weekend showed profits earned by China’s industrial firms contracted in June. This fuelled concerns that the bruising trade war will drag on economic growth.
June was the first full month of higher U.S. tariffs on $200 billion of Chinese goods.
START TRADINGForex – Busy central banking week ahead
Most major currencies were keeping moves small ahead of Wednesday’s expected 25 basis point cut by the Federal Reserve. Markets will watch for indications of monetary easing in the world’s largest economy.
The dollar hit a two-month peak on a basket of currencies at 98.010 and was last trading at 98.023.
The dollar edged back to 108.62 yen. Japanese government bond prices edged down on Monday after stronger-than-expected U.S. GDP data. Market players expect the Bank of Japan to send dovish messages. The BOJ is expected to keep its massive stimulus programme unchanged at the end of a two-day meeting on Tuesday.
The Australian dollar had dipped to a one-month low of $0.6900 amid interest rate cut bets there too.
The euro stood at $1.1125 on Monday, just above last week’s two-year trough around $1.1102.
Sterling slides to weakest since March 2017 on no-deal Brexit fears. The British currency was pinned near 27-month lows around $1.2375. There are reports that the government of Prime Minister Boris Johnson was preparing the ground for a “no-deal” Brexit. Sterling has fallen more than 5% since May, largely on fears of a disorderly no-deal Brexit.
In commodities, oil drifted down pressured by the usual concerns about over supply and slowing world demand. Brent crude futures eased 33 cents to $63.13, while U.S. crude lost 16 cents to $56.04 a barrel.
Gold Prices were stable on Monday ahead of a U.S. Federal Reserve meeting later in the week. Spot gold were little changed at $1,417.72 per ounce as of 0613 GMT. Prices had dropped about 0.5% in the previous week, pressured by dollar strength and robust U.S. economic data. Silver dipped 0.2% to $16.35 per ounce.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money