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Market Recap – FOMC aftermath

Thursday, August 1, 2019 10:03 AM GMT

The FED has cut rates by 25bps and moved the milestone for stopping its balance sheet reduction one month earlier (from September 2019 to August 2019). The main reason presented was the persistent low inflation that could potentially damage the long-term expectations, the weak global growth (particularly in Europe and China) and the trade war. In a course of 7 months, the FED has moved from expecting to further increase rates, to patience to get a sense of the overall direction of events, to action. The gradual swift of the FED’s monetary policy is succeeding to sustain the US GDP. On the yesterday’s market recap, we have stated that there is a chance that markets could switch to a risk-off mode with equities falling and USD strengthening, which was the exact course of events. Jerome Powell communicated that this was a mid-cycle rate cut adjustment, kind like of an insurance cut that wants to boost economy via the confidence channel, and confirmed that this was not the beginning of a lengthy cutting cycle.

Today, it is the Bank of England turn to have its monetary meeting and address its views, as the probability of a hard, no deal Brexit within the 31st of October 2019, is rising.

Macro releases: The global manufacturing activity is decreasing, it is a serious source of concern and today, most of the major economies (UK, EU, Canada, USA) are releasing their Manufacturing PMI numbers.

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