Yesterday saw Boris Johnson take office as the new Prime Minister of the UK after successfully seeing off fellow Tory party leadership contender Jeremy Hunt in a result published on Tuesday of this week. In his first speech as prime minister Mr Johnson promised to lead Britain out of the EU on Oct. 31 with “no ifs or buts” and warned there would be a no-deal Brexit if the bloc refused to negotiate, a fact that has weighed heavy on to sterling over recent weeks.
Sterling held onto gains it made since Boris Johnson took office as Britain’s new prime minister on Wednesday, but investors are still wary of a no-deal Brexit in which Britain would leave the European Union without a trade agreement. Economists warn that a no deal Brexit will almost certainly push the UK towards a recession and could double consumer debt. Sterling was a shade higher at $1.2484, staging a modest recovery from a 27-month low of $1.2382 reached last week.
In Europe, today marks the much-anticipated ECB policy meeting, where many feel the central bank may signal monetary easing, as growth in the bloc struggles. Data recently released showed the German manufacturing sector contracted at the fastest pace for seven years, causing European bond yields to drop with futures markets now pricing in the probability of a 10 basis point cut at 48%. The single currency is 2% down against the dollar this month with rates overnight at $1.1132.
In the U.S. the greenback was able to hold on to recent gains, as a statement was released from the White House stating that U.S. negotiators will meet with China in Shanghai on July 30th. The trade war between the world largest economies rumbles on, although there have been positive signs of a breakthrough over the last days. Subsequently the dollar index, a measure against six major currencies sits at 97.701, nearing the 8 week high of 97.810.
Today’s focus is the ECB policy meeting at 12:45pm and the accompanying press conference at 1:30pm
Markets ponder need for US rate cut
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