By Enrique Diaz-Alvarez, Chief Financial Risk Officer of International Payment Company Ebury

The widely expected reduction in interest rates of the Federal Reserve eventually caused US bonds and a rise in the dollar. The markets seem to have been expecting an even more “relaxed” result, and the only vote in favor of a greater reduction by 50 meters. He did not satisfy them. The stock markets, however, moved up again. The dollar has recovered and the range of fluctuation maintained by early summer seems to remain stable.

OR week is abnormally ‘light’ In terms of financial announcements. The main interest will focus on Tuesday, with the publication of PMI indicators about business activity worldwide. This is the basic growth indicator in developed economies, especially in Europe. In addition, attention is focused on the US bond market, where mid-term interest rates seem to ignore Fed interest rates and remain high.

Sterling

The Bank of England maintained a standby attitude. Inflation ranged within expectations, reaching 4% (as opposed to 3%) in the basic and structural measurements. This confirms a stagnation of the Central Bank that makes it difficult to justify further interest rates reductions from the Central Bank. The messages from the labor market report were contradictory: While investigations showed a strong expansion of employment, tax data on employees recorded another small monthly shrinkage. On the contrary, it was clear from the budgetary sizes of August, where expenses and deficit exceeded any provision. Overall, the risk of falling the pound seems to be balanced by the support of high interest rates and its attractive valuation based on most indicators.

Euro

After reducing interest rates from the ECB to the lowest point of the cycle, to 2%, the eurozone seems to have been removed from the headlines moving the currency market. OR Growth remains sluggish but adequate to recession preventedwith support from strong employment and expenditure on services. Tuesday’s PMI indicators will give a new picture of the state of the European economy.

Dollar

The markets had different reactions to the widely expected 25BP reduction of the Federal Reserve last week. The stock markets interpreted the move positively and recorded new historically highs, as is the case with almost every news. However, in the bond market, the reaction was disappointing, as only the most recent member of the Board of Directors – appointed by Trump – voted in favor of a 50 -meter reduction, while the Dot Plots diagram revealed major disagreements as to prioritize inflation over the labor market. The main reference for the dollar this week will be the August PCE price report, announced on Thursday.