The mood in financial markets is relatively upbeat at the start of a very busy week, as investors shrug off the G7 meeting which didn’t exactly go to plan as Donald Trump rejected the prepared communique and left early.
While everyone will have hoped for a better outcome from the meeting, I don’t think anyone is surprised given Trump’s views on trade and his combative approach to the country’s allies on the issue. Perhaps it was the expectation that this was a likely outcome that has led to investors shrugging it off and turning their attention to something more interesting, and there’s certainly plenty for them to focus on in the coming days.
Trump’s next meeting with North Korean leader Kim Jong Un on Tuesday will be of interest as the US President looks to score a victory and distract from the country’s souring relationship with its Western allies. Whether the two leaders are actually on the same page in regards to the goals of the meeting could determine just how successful the talks are but Trump in particular will be keen to be seen making progress towards denuclearisation.
Central banks will be very much in focus this week, with the Federal Reserve, European Central Bank and Bank of Japan all meeting and announcing monetary policy decisions. The Fed and ECB meetings will be of particular interest, with the former widely expected to raise interest rates for the second time this year and lay the groundwork for at least one more, possibly even two given the progress made on its inflation goal.
The ECB has been gradually drawing a close to its quantitative easing program over the last 15 months, first reducing monthly purchases from €80 billion to €60 billion in March last year and then to €30 billion from the start of this year. With that expiring in September, an announcement on whether we’ll see another small taper and extension is expected at this meeting or the next and discussions will very likely take place on Thursday, as has been indicated by some officials. With new economic projections also being released, the meeting should provide some insight into what we can expect for the rest of the year.
The first day of the week may be a little quieter, but we’ve already had some manufacturing data from the UK which was disappointing. The UK itself won’t be far from the headlines in the first half of the week, with jobs data due out tomorrow, inflation numbers on Wednesday as well as two days of talks in parliament over the amendments to the Brexit bill.
