Overall gains are limited as the week draws to a close in London, with the FTSE 100 ten points higher and the Dow edging back from opening highs.
Equities are finishing the week on a positive note, as investors look forward to the upcoming ECB and Fed meetings. The day has seen rapidly evolving expectations of what the Fed might do next, as officials sought to play down a speech that seemed to suggest dramatic action was round the corner. John Williams may well have been speaking ‘academically’, but the timing is too convenient for it to be viewed as anything more than a hint about what the Fed will do next. Meanwhile, the ECB is gearing up for its next meeting, and here the case for action is even more pressing than in the US. A failure to act now would hit investor sentiment hard, prompting drops in European equities that are already vulnerable to further declines. Worryingly for the FTSE, it has been unable to hold its gains over the past few days, with a similar situation prevailing in European indices. A boost from the Fed and the ECB would help revive flagging sentiment, especially as we approach the thin August period.
After leaping higher yesterday, GBPUSD has reversed to an extent. Next week is almost certain to see Boris Johnson ascend to the premiership, promising more upheaval for the UK and EU. Signs point to increased instability if the new government attempts to push for a ‘no deal’ outcome, suggesting that the Johnson government could be the shortest administration in recent memory, as this could spark a full-blown rebellion among soft-leave and Remainer Conservatives.
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