Global markets trajectories indicate that traders are now more confident about the global economy than they were a week ago. Mark Carney, Governor of the Bank of England, sent out a message in an attempt to calm markets, stating that the UK will embrace more stimulus to counter repercussions from the Brexit fallout.
Pound’s rally ceases after Carney’s remarks
Carney said that the bank will assess circumstances arising post-Brexit on July 14, which will decide its monetary policy direction in August. U.K. interest rates already stand at a low of 0.5% and the possibility of a further rate cut has put off a rally in the pound. During today’s session, sterling drifted lower as Carney’s rescue remarks derailed the currency from its upward path after reaching 31 a year low. Carney’s comments prompted Nomura, a Japanese financial holdings company, to alert about an incoming recession in the U.S. The research firm said that quantitative easing and probably more interest rate cuts cannot be ruled out.
A cut to what is the question, since rates are already near zero.
Mismatch between official and private data
The outlook for U.S. Dollar (CURRENCY:USD) also faded as weak Chinese data made traders believe that chances of a rate hike by the Federal Reserve is out of question, at least for this year. In China, Caixin PMI (purchasing managers’ index), revealed that the manufacturing activity in factories across the region has yet to pick-up. PMI showed a drop to 48.6 in June, as compared to 49.2 in May. On the other hand, official data from the Chinese government showed PMI at 50 in June, which came in line with the estimates.
Chinese markets chose to respond to official data over Caixin, lifting the Shanghai Composite Index by 0.1% today. Equities in the rest of Asia also finished higher on expectations that central banks will pump out measures to support markets. European markets oscillated between gains and losses, however, markets appeared to be echoing positive sentiment after the Eurozone reported a drop in its unemployment rate to a five-year low. Meanwhile, U.S. Stock Futures were seen trading nearly 0.3% lower during early hours. NASDAQ (INDEXNASDAQ:NDX) Futures dipped 0.30% to 4,393.62 and S&P 500 INDEX (INDEXCBOE:SPX) fell 0.31% to 2,083.75.