Draghi pledges stimulus if needed

The euro sold off to $1.11 to the dollar and just above 89p versus sterling following comments by Mario Draghi that suggested the ECB may be considering easing monetary policy. Equities got a boost from that (in addition to more positive US/China trade sentiment) while bonds rallied, particularly in Europe, with 10-year bund yields now down to -0.3%

ECB President Draghi said that additional stimulus would be needed if the outlook for the Euro area economy did not improve. Draghi left open what form this stimulus might take though he specifically stated that ‘more rate cuts are part’ of the ECB toolkit but also there was ‘considerable headroom’ to restart QE and that the ECB has flexibility to fulfil its mandate

Markets cheered by news from President Trump that he and Chinese President Xi had a ‘very good’ phone conversation and will hold an ‘extended meeting’ about a trade deal at next week’s G-20. While trade tensions remain high, the meeting could put off a further increase in tariffs for now at least

Boris Johnson cleared the second round of the Tory party leadership election ballot and remains the front runner. They are now down to 5 candidates but the race is really now about who will join Boris in the final two. Johnson increasingly likely to be the next PM but appears to be softening his Brexit approach (a little) reportedly telling business leaders yesterday he wanted a longer transition period as part of his Brexit plan

Data due today includes UK inflation data and Draghi is due to speak again in Sintra. However, the main focus will be on the Fed meeting which concludes this evening. No move is expected but Chairman Powell may strike a slightly more dovish tone in his press conference