• Main event and eagerly anticipated European Central Bank interest rate meeting
  • US-China to offer gestures of goodwill

Positive data continues to flow in the UK as the Royal Institution of Chartered Surveyors (RICS) house price balance improved to -4 in August, up from -9 and beat expectation of -10. However, with the uncertainty from Brexit, this may not be enough to give Sterling that stability.

Meanwhile, US-Sino trade war talks are still in development. The US and China have both offered gestures of goodwill in trade wars – first, China announced they would exempt 16 categories of US imports from new tariffs and that was followed by the US taking conciliatory steps. Trump tweeted: “At the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars’ worth of goods (25% to 30%), from October 1st to October 15th.” It all improves the chances of more fruitful trade talks in Washington next month.

 

Main event and widely anticipated, European Central Bank interest rate meeting

The options that the European Central Bank could undertake are many, including interest rate cuts, stronger forward guidance, a new programme of asset purchases and compensation for banks to ease the unfavourable effects of interest rates.

They prefer a combination of measures because they feel that a package is "more effective than a sequence of selective actions." The market expects a minimum of a 10 basis points rate cut. If the central bank combines this with a new Quantitative Easing programme, EURUSD will sell off aggressively, but if all they do is cut rates and strengthen their low rate pledge, the Euro will soar in disappointment.

Current ECB chief Mario Draghi could also opt for a stimulus package that does not include the most aggressive measures to leave his successor Christine Lagarde with ammunition to fight a deeper slowdown.

 

More data due today

Other data releases today include the Eurozone’s industrial production, the US Consumer Price Index (CPI) and Jobless Claims and Canada will release their new house price index.ber of foreign policy challenges with North Korea, Iran, Afghanistan and Russia. He will announce a new Security Advisor next week.

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