• Chinese state media reported face-to-face negotiations with the U.S. may resume soon as China considers a plan to encourage American agricultural products purchases.
  • Boston Fed President, Rosengren, said last Friday that he sees no reason for a rate cut as he believes that the U.S. economy is not experimenting an economic slowdown. Consequently, bets of an aggressive rate cut of 50 bps have waned as the trade conflict seemed to abate and economic data turned slightly more promising. However, markets are still expecting a Fed rate cut of at least 25 bps by the end of July. Investors will watch closely corporate earnings this week for signs of economic slowdown, while the Fed is in a blackout period that limits FOMC participants to speak publicly.
  • Oil gained amid rising tensions in the Persian Gulf with Brent prices hovering around 63 USD. The United Kingdom is preparing its response to Iran's arrest of the British oil tanker in the Strait of Hormuz. Core government bonds gained with the German 10Y yield inching down ahead of the ECB meeting on
  • Thursday where it is expected to strengthen its forward guidance. Moreover, a worse-than-expected Chicago Fed National Activity Index (-0.02, consensus 0.08, previous month -0.05) dragged down the UST 10Y yield. Elsewhere, peripheral risk premia widened, particularly in Italy as chances of snap election heightened given the standoff between coalition partners, the League and the Movimento 5 Stelle (M5S).
  • In FX markets, the USD appreciated slightly both across the G10 board and EM currencies. The pound slipped driven by a higher possibility of a no-deal Brexit due to the likelihood of Boris Johnson to become the next U.K. prime minister.
  • Equity markets showed minor changes, being well supported by the prospects of central banks with looser monetary policies.

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