Stocks surge, as dovish Draghi comments boost sentiment

Draghi has come full circle, with the ECB now willing to cut rates should the slowdown continue. Meanwhile, pound volatility looks likely with a second Conservative vote and BBC debate heightening speculation. 

• Draghi drives euro lower, yet dovish stance helps stocks
• Trump puts pressure on the Fed, but meeting with Xi Jinping equally important
• Sterling in focus, as Boris limbers up for tonight’s BBC debate

Markets are enjoying a welcome boost on both sides of the Atlantic, with dovish comments from Mario Draghi tallying up with a more optimistic outlook for US-China relations. A volatile day for eurozone markets has seen both sharp declines for the euro and substantial gains for stocks. With Mario Draghi coming full circle to exclaim the ECB’s willingness to cut rates in the event of a continued slowdown, the subsequent declines in both eurozone and German ZEW economic sentiment surveys highlighted the growing likeliness that such actions will be more than just words. With markets now expecting a rate cut by September, with widespread trend towards looser monetary policy is continuing to add
 support for stock markets. 

Donald Trump has been heralding Mario Draghi’s actions as being unfair for the US, yet this is a global crisis which is grounded by Trump’s own America First policies, which have started trade wars with numerous trade partners. To a large extent it is likely that Trump has seen today’s events as a potential carrot to dangle in front of the Fed as they undertake their latest monetary policy meeting. Whether or not the Fed cuts rates, US growth will likely continue to suffer as long as the trade war with China continues due to the detrimental effect it has upon business confidence. However, we have seen a glimmer of hope on that front, with Trump’s tweet that he will be undertaking an
 extended meeting with Xi Jinping bringing about a renewed optimism that a resolution could be in sight. 

All eyes now turn to the UK, with Tory MPs undertaking a second in a series of votes as they seek to whittle down the remaining eight candidates into the final two that will be presented to the wider membership. However, while this vote will be notable in the extent that it quantifies support once again, this evening’s appearance by Boris at the BBC debate will likely garner greater attention. The pound’s decline into a new five-month low against the dollar this week alludes to the fear over BoJo’s willingness to see the UK leave irrespective of whether a deal is agreed upon or not. And with three years having passed with little progress, the hopes of finding such a breakthrough in the mere
 three months between taking office and the October deadline seem slim at best.