Monday was a fairly quiet day of trading with the economic calendar being light. The markets were trading flat for the most part. Focus was on the Japan trade balance data, which increased to 0.33 trillion yen, beating estimates of 0.24 trillion yen. The finance ministers and central bankers of the G20 economies met in China over the weekend with Brexit and monetary policy staying as the main focus for the leaders.In Germany, business confidence data for July slipped to 108.3 compared to 108.7 with businesses noting that they were less optimistic after the Brexit referendum.
By Tuesday, the markets were already preparing for the FOMC meeting due later in the week. The US dollar was seen slipping against its peers. The market moving news on the day was the Japanese yen which strengthened for a second consecutive day. The yen jumped sharply as reports from Nikkei daily suggested that Japan was considering a 6 trillion yen in the fiscal stimulus package. This was lower than the 10 trillion that the markets were expecting to see.
Tomoichiro Kubota, the senior market analyst at Matsui Securities, said, “Fiscal stimulus looks less bold, and we aren’t sure if [Bank of Japan Governor Haruhiko] Kuroda will ease further. It’s difficult to buy more from here.â€
In Europe, the sterling came under pressure after previously known hawk; BoE’s Martin Weale said that he favors the central bank to increase its stimulus spending effective immediately. His views shifted after the quarterly CBI Industrial trends data showed that more than 50% of UK firms were less optimistic about the general business situation. “I see things rather differently from what I would have done had we not had those numbers, and the material point is that they were collected after July 12, so after the initial shock of the referendum,†Martin Weale said. His comments were dovish just a week after he said that there was no urgency to ease monetary policy.
