• Financial markets were cautious ahead of Fed’s decision later today, following yesterday’s positive boost from a very dovish commentary by ECB chief Draghi, along with some respite on trade as Trump confirmed his meeting with China’s leader Xi at the G-20 summit on June 28.
  • The upcoming FOMC meeting remains in the spotlight today, where hints of an insurance cut in coming months is highly priced in by markets.
  • ECB’s Weidmann, who is in the race to substitute Draghi, struck an unusually dovish tone, accepting the bond purchase program and the Outright Monetary Policy Transaction programme (OMT) as ECB’s tools.
  • Italy is determined to avoid a confrontation with the European Commission as Prime Minister Conte promised that Italy would respect European Union fiscal rules while proposing changes that enables more public investment and stronger growth (see). Moreover, Italy’s finance minister ruled out the introduction of mini-bill of Treasury to pay debt (Mini-BOT).
  • In the UK, Brexit options remains polarized. Boris Johnson remains the frontrunner to become Britain’s next prime minister, well ahead of Stewart, a soft-Brexit-supporter candidate. Meanwhile, Dominic Raab, a hard-Brexit supporter, has been eliminated from the race. The five candidates left will be cut to the final two by the end of this week
  • Government bond yields partially reverted yesterday’s decline, as investors cautiously await the Fed’s decision, except in Italy, where risk premium ended flat trimming its early narrowing as its government promised to avoid EU debt action.
  • As regards currencies, the US dollar depreciated slightly across the G10 board and emerging markets. The EUR reverted yesterday’s subdued depreciation. Oil prices remained steady, after yesterday’s rebound, as OPEC and its allies agreed to hold the next meeting to discuss oil-output cuts at the beginning of July.

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