• richard evans

Central bankers to set the tone today

Good morning

Suddenly the world feels like a better place. Equity markets are higher, USD a bit lower, GBP up, it even seems like good news that US 10 year yields are a bit higher. And the sun is still shining! We know the market has been looking at the large increase in Covid infections recently, primarily due to the fast-spreading delta variant, but as I keep saying it is not so much about case numbers, but about how many develop serious illness or require hospitalisation. We just don’t know as yet and it seems as though the market is feeling a little more relaxed than it was.

After a few days of little economic data, we do have today the ECB rate announcement. No policy changes expected but the market does seem to be looking for a dovish statement. A lot will come down to whether there is any talk on tapering of asset purchases. If they suggest tapering could begin later this year, I’d imagine that is quite hawkish but any mention of it being pushed into 2022 is clearly more dovish. Focus also on rate rises, I’d imagine confirmation from Lagarde that the ECB see no rate rises through 2022 and 2023. I’m not sure we will see a huge move in the currency markets, mind you. EURUSD at 1.1800 right now.

We do have BoEs Broadbent speaking this morning and it will be interesting to see whether he gives any clues as to what the BoE may look for at its rate meeting next month in terms of inflation, rates and asset purchases. With Haldane now moved on, the thinking is there would be little in the way of hawkish BoE members, however recent comments from officials seem to suggest there may still be some interest among members in reducing asset purchases later this year, with a rate rise in H1 2022. GBP does have the potential to move on his comments, GBPUSD currently at 1.3750 is a good bit higher than in recent days, while GBP also performs well against EUR, with EURGBP down to 0.8580 (GBPEUR 1.1655).

Make the most of the hot weather today, it looks as though It may cool down a bit into the weekend. I am never one to complain at hot weather but we’ve had it up in the 30s for a few days and I must say I wouldn’t mind if it sat in the mid-20s for a bit.

- 09.30 BoEs Broadbent speaks

- 12.45 ECB rate announcement

- 13.30 US initial jobless claims, Chicago fed activity index

- 13.30 ECB press conference

- 15.00 EU consumer confidence

- 15.00 US existing home sales

- 23.45 RBAs Lowe speaks

- 00.00 AUS commonwealth bank PMIs

- 00.01 UK GfK consumer confidence

- 07.00 UK retail sales

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