Dear Reader,

Today's overview of economic news and market action:

• Investor sentiment was mixed yesterday …
• ECB hiked rates by 25bps, as expected …
• US Q2 GDP printed ahead of the consensus …
• Overnight the BoJ tweaked its yield curve control policy …
• Amid some volatility on forex markets, EUR/USD opens back below $1.10 … 
• EUR/GBP is in the top half of 85-86p … 
• USD/JPY is at the midpoint of ¥139-140.
• Inflation data due on both sides of the Atlantic today …

ECB raises rates again, leaves options open about further hike

As had been well signalled, the July meeting of the ECB’s Governing Council saw the central bank raise rates by a further 25bps, pushing the key deposit rate up to 3.75%

Fed hikes by 25bps, keeps its options open

As widely expected, the Fed hiked US rates by 25bps at the conclusion of its policy meeting yesterday, bringing the target range for the funds rate up to 5.25-5.50%. 

PMI declined to 47.3 in June, indicating a further softening in business conditions. New orders, and output fell. Meantime, there was a further easing in inflationary pressures Traditional industrial production rose by 3.8% in the 3 mths to May. 3 mma up 6.6% YoY also.

Economic data, especially on labour markets, have generally surprised to the upside in 2023, though GDP growth was sluggish in Q1.

Global economy still facing considerable headwinds  Central banks remain on rate tightening path, though Fed and ECB appear to be nearing end of their hiking cycle. BoE has further to go, with markets pricing in another 150bps of UK rate hikes