Key weeks are coming for trade war and Brexit
The Federal Reserve monetary policy meeting will focus on the eyes after the European Central Bank reopened the stimulus key, although investors will not neglect the fluctuations of – at this point – two old acquaintances: the commercial war and Brexit.
Protesters during a march through Brexit. / Via REUTERS
Reuters | Manuel Farías
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Leer en español: Se vienen semanas clave para guerra comercial y Brexit
The ECB promised on Thursday to continue injecting stimuli into the economy indefinitely through asset purchases and interest rate cuts, which were set in a new record of negative territory, in an effort to shore up the euro zone.
The agency also cut inflation forecasts for the next three years and its projections for GDP 2019 and 2020.
"I don't think this changes the game," said Pictet Asset Management chief strategist Luca Paolini. "Even if it was a positive surprise in some areas, there were negative surprises in general. They basically did what the market expected."
Now, in weeks loaded with decisions of central banks worldwide, the look turns to the Fed, which on Wednesday will communicate its monetary policy decision and also disclose economic projections.
Despite strong data on employment and an acceleration of inflation, markets assume that the central bank will cut interest rates by 25 basis points. A decision that would once again irritate the president of the United States, Donald Trump, who in the week asked the Fed to reduce the costs of debt to zero.
"The European Central Bank, acting quickly, cuts rates 10 basis points. They try, and are succeeding, to depreciate the euro against a VERY strong dollar, damaging US exports (…) And the Fed wait, wait and wait, "Trump tweeted half an hour after the ECB's monetary policy announcement.
They get paid for borrowing, while we pay interest! "
Also read: Are China and the U.S minimizing trade war?
The focus of the investors will also follow the developments of the trade war between the United States and China, which has shown signs of some calm after the escalations of recent weeks.
Smaller officials from both countries will meet within days in Washington before the meeting of top trading negotiators in early October, seeking to alleviate the dispute that has hit the financial markets for more than a year and generated fears about a recession world.
All in the middle of the nebula facing Brexit for a month and a half to be completed and with Parliament suspended.
