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Markets in tight ranges ahead of central banks’ meetings

Central banks are pondering more interest rate cuts to stave off the negative effects of trade tensions and a global economic slowdown.

Centtrip: US services sector data compounds recession fears

The Dollar got a boost from investors’ slightly improved confidence and the Yen dropped in early trading today. However, the currency market is stuck in tight ranges ahead of central banks’ respective meetings over the next week.

Market participants will focus on the European Central Bank’s meeting this Thursday, 12 September. The ECB, which is expected to push interest rates even further into negative territory, will set the tone for upcoming interest rate decisions by the Federal Reserve and the Bank of Japan next week, not to mention for the broader global risk appetite.

ECB policymakers appear to be leaning towards a package that will include a rate cut, a pledge to keep rates low for longer and compensation for banks over the side-effects of negative rates.

However, there have been concerns that global central banks are at the limits of their stimulus options. For now, a cautious risk-on mood has prevailed after political crises, which had battered markets from Britain to Hong Kong, have abated, taking the shine off safe-haven assets.

Much of the recent positive sentiment came from optimism around US-Chinese trade negotiators, which are due to take place in Washington next month. That was tamped down by White House trade adviser Peter Navarro yesterday, 10 September. He urged patience about resolving the two-year trade dispute between the world’s two largest economies and said to “let the process take its course”.

The Yen, which is already under pressure as investors spurned safe havens, was sold overnight after media reports that BoJ policymakers were more open to discussing the possibility of expanding stimulus when they gather on 18-19 September.

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