Slow start for stocks as focus shifts to central banks

Central banks are in focus this week, with Wednesday’s Fed meeting already causing volatility in the FX markets. Meanwhile, Boris Johnson’s continued absence does little to dent his popularity, as the chance of no-deal Brexit raises likeliness of stockpiling.

• European markets tread water ahead of central bank focused week

• Fed meeting the main event, as dollar rise highlights easing June rate cut expectations

• Johnson cruises towards victory, with stockpiling likely to ramp up if he takes power

European markets are largely treading water this morning, as an indecisive Asian session gives way to a similarly unconvincing start to the week for UK and eurozone markets. The dollar managed to stage a late recovery last week, with volatility expected to continue today ahead of the crucial Federal Reserve announcement on Wednesday. The week will be dominated by central banks, with the RBA, BoJ, Fed, and BoE all providing their latest monetary policy decisions in a period where markets are seeing a notable shift towards more dovish standing. Ultimately, we will be watching out for whether the Fed decides to cut rates as a key driver of market sentiment, yet Friday’s rebound for the dollar highlights the feeling that this is likely to be a wait-and-see event given the release of Q2 GDP next month.

The pound has continued its decline today, as the early June gains prove short-lived. The weekend debate was notable for Boris Johnson’s absence, and for the most part it seems to a fight over who will take the second slot to go toe-to-toe with BoJo in the final two. Johnson remains a huge favourite to become the next prime minister, and given his unpopularity in Brussels, coupled with his insistence that a no-deal Brexit remains on the table, there is good reason to believe we will see the pound continue to suffer if he gets into power. Firms have been open about their lack of preparation for a no-deal Brexit, yet should Boris Johnson become prime minister, we are sure to start seeing a
sharp rise in stockpiling ahead of the October deadline.

Ahead of the open we expect the Dow Jones to open 54 points higher, at 26,144.