European stocks have got off to a slow start after President Trump criticised the Federal Reserve for its policy of pushing rates up, while the Chinese yuan weakened to its lowest levels in a year, before pulling back sharply.
While it’s no surprise that the President wants a weaker US dollar, he has indicated just such a view on previous occasions, as has his Treasury Secretary Steven Mnuchin, this is the first time he has directly criticised the US central bank for helping push it higher.
Maybe someone should point out to the President that the reason the US dollar is so strong is because the US economy is currently the brightest light in the economic sky, largely as a result of his policies, and which could result in the US economy posting a 4% annualised Q2 GDP reading next week.
Nonetheless the Fed will continue to look at pushing rates up, while the US administration will continue to push back on any rise in the US dollar, which they feel is being engineered by either the Chinese or the Europeans in order to offset concerns about US trade policy.
The pound continues to come under pressure as Prime Minister Theresa May visits Northern Ireland to reassure people that there will be on hard border with the Republic of Ireland, as investors continue to price in the rising political risk of a break down in Brexit talks.
Today’s public finance numbers for June showed that the UK government borrowed £3.6bn a slight increase of £3.4bn in May.
Elsewhere in Europe the Italian markets have slid sharply on the back of speculation that Italian finance minister Giovanni Tria may be forced out. Both equity and bond markets have come under pressure after an Italian newspaper reported that both Matteo Salvini and Luigi di Maio, Italy’s new populist leaders might try and force him out in a battle over the running of state lender CDP.
It’s another busy day on the US earnings front with the latest Q2 updates from General Electric (NYSE:GE) and Honeywell (NYSE:HON) due before the open.
Dow Jones is expected to open 19 points lower at 25,045
S&P500 is expected to open 1 point lower at 2,803
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