On the occasion of the US Federal Reserve Governor's quarterly report to the US Congress Finance Committee, US Federal Reserve Chairman Jerome Powell nourished market expectations for an interest rate cut in the near future. The Fed is ready to take appropriate action to secure sustainable growth in the face of persistently low inflation and uncertainties, especially in the trade conflict, Powell commented. As a result, the financial markets are now firmly expecting an initial rate cut of probably 25 basis points at the next monetary policy decision on July 31. The Fed had raised its key rate four times in 2018 to the range of 2.25% to 2.5% before pausing last December. The minutes of the last interest rate decision of June 19 published yesterday evening also seem to underline the will to ease the key interest rate. Several FOMC members felt that an early interest rate cut was necessary for preventive reasons. The US dollar subsequently fell against the euro to 1.1280, while the yield on ten-year US government bonds fell from 2.11% to 2.04%. The US dollar was down by 1.5% against the euro. Meanwhile, Canada's central bank, as the majority of analysts expected, left its key interest rate unchanged at 1.75%.
Larry Kudlow, President Donald Trump's top economic advisor under his leadership, has been constructive in the trade talks between the US and China that have been resumed since the G20 summit. The next step is now another personal meeting of the delegations, led by US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. Meanwhile, the Chinese telecom company Huawei remains on the US government's blacklist, but the US Department of Commerce will issue licenses to US companies that want to sell products to Huawei. The spotlight is also on the relationship between the USA and Europe. In the meantime, German economics minister Peter Altmaier met with Lighthizer in Washington and talked about differences in trade policy. Altmaier was optimistic and said that a trade agreement with the US would be possible by the end of the year.
In the conflict between the US and Iran, the tone has again intensified and the Council of the International Atomic Energy Agency (IAEA) met yesterday for a special session. The background is the uncertain future of the nuclear agreement with Iran. Washington accuses Tehran of blackmailing the international community and provoking an escalation with its partial withdrawal from the agreement. In May 2018, the US unilaterally withdrew from the agreement and reinstated the economic sanctions against Iran. However, the US government wants to get the Iranian leadership to negotiate a new agreement that includes the Iranian missile program in the agreement.
|08:00||GE||Consumer Prices (y/y)||+1.3%|
|08:45||FR||Consumer Prices (y/y)||+1.4%|
|09:30||SW||Consumer Prices (y/y)||+2.2%|
|14:30||US||Consumer Prices (y/y)||+1.8%|
|14:30||US||Core Consumer Prices (y/y)||+2.0%|
|14:30||US||Initial Jobless Claims||221,000|
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Source: LGT Bank (Switzerland) Ltd.
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