Central banks will dominate the week ahead with policy updates from the BoJ, BoE and the Federal Reserve, with each looking towards a different action.
The pound was trading flat at the start of an important week. With Brexit noise expected to die down investors will be able to focus squarely on the BoE rate decision. The markets are currently pricing in an 80% probability of a 0.25% rate hike, even though June inflation missed expectations by 0.1% at 2.4%. The build up will provide a welcomed distraction after recent Brexit woes, which concluded for a summer break with dismissive comments from Michel Barnier towards Theresa May’s grand trade plan, prompting further fears of a no deal Brexit.
Theresa May promising to take control of Brexit negotiations personally is offering some support to the pound. However, a rate rise from the BoE could keep sterling buoyant whilst Brexit uncertainties weigh going forward.
London Capital Group said: “The markets have opened the new week lower as traders digest Friday’s US tech selloff and look cautiously ahead to a busy week of central bank and corporate updates.
“Volumes are expected be thin as its the summer holidays but this week promises no shortage of high impacting events. With thin volume and a calendar packed with market moving events, big swings could be on the cards for some markets.”