Interest rates and markets:
BOE: Following the recent rate increase, the Bank of England is likely to monitor the economic situation, the current stages of Brexit negotiations and coupled with 3-month Libor at .81%. We do not expect a rate increase at the next meeting in September 13th 2018.
Fed: Current federal fund rate ranges from 1.75% to 2% Next FOMC meeting 25th and 26th of September. The 3 months $ Libor is at 2.32%. Today’s slope 3 months versus 10 years treasury is down to 0.75 %, 2-year treasury slightly down to 2.629% while the 10-year treasury is down to 2.86%. After no rate increase in August, we still have a strong hawkish Fed and with inflation at 2.9% well above the 2% target and despite a President against rate increases, we expect a .25% rate increase at the September meeting and still expect two further rate increases before year end.
ECB: Next ECB monetary policy meeting is 13th of September. Slow rising inflation and slower growth are slowly changing the economic situation. Nevertheless, we do not expect a rate increase in September 2018.
Equity: Markets are reacting negatively to new actions in the China/ US trade war.
Volatility up to 12.86 %: Could this volatility spike indicate a disappointing September month based on a growing list of global worries?
UK & Europe: CAC 40 at 5,406 down 1.3% but still 1.86% up YTD. FTSE 100 at 7,432 down 1.1% and 3.3% YTD.
USA: Dow jones down 0.1% at 25,964 but 5% up YTD and S&P flat at 2,901 and 8.5% up YTD.
$/£ at 1.30 down 3.7% YTD. Sterling is struggling after European Union Brexit negotiator reversed recent goodwill rhetoric.
€/$ at 1.1616 but could fall depending on Italy’s budget news and a yield widening between Italian and German bonds.
£/€ at 1.11: down 0.9% YTD mostly reflects Brexit concerns.
Gold at 1200: mostly unchanged but down 8.1% YTD. We could still see a corrective rally in the short run.