Investors on edge ahead of central bank decisions

Markets are struggling to hold early gains as investors start to fret about key upcoming central bank meetings. Aside from some gains for crude oil stocks as energy prices rise thanks to the situation in the Gulf, the main focus on an otherwise quiet day is what the ECB and the Fed will do. European markets are certainly in need of something to get the moving, as their struggle to move higher over the past two sessions looks to be running out of steam. A lack of movement, or an absence of a commitment to action, from the ECB, will likely see European equities endure a tough August, matching the seasonality patterns of the past twenty years. US stocks at least have earnings season to drive  them forward, but even here the Fed meeting next week is the only game in town. Even a stellar earnings season is trumped by what the FOMC will do, so for the next two weeks equities may well go nowhere fast.

Having spent the past few weeks steadily pricing in a ‘no deal’ situation, GBPUSD is relatively calm ahead of the announcement of the winner of the race to succeed Theresa May. But the uncertainty continues to hit UK assets, and so long as the government seems determined to push ‘no deal’ as a viable option then both sterling and the FTSE look vulnerable to more downside.