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  • The Federal Reserve (Fed) relayed a more dovish than expected guidance on their monetary policy. The Fed now anticipate no rate hikes in 2019 and expect only one hike in 2020. In addition, they announced that the tapering of their balance sheet will be concluded by September. Last week’s meeting and press conference reiterates the Fed’s reliance on contemporaneous data for future monetary policy.
  • The EU are now dictating the Brexit timetable primarily due to the upcoming European parliamentary elections (but possibly also because of European fatigue of dealing with the repercussions of UK domestic politics). This week may be momentous from a UK perspective with suggestions that the House of Commons could take control of the process. A hard Brexit is a possibility but a more likely scenario is a softer Brexit version of May’s deal being agreed.
  • There was conflicting news flow (not for the first time) on the saga that is the US China Trade negotiations. Ultimately, we believe that there will some form of market friendly resolution because (a) as Gary Cohn (Trumps old economic adviser) stated, “Trump needs a win” and (b) Trump is unlikely to conduct an economically painful trade war prior the US Presidential election of next year.
  • The most recent reading of Eurozone Manufacturing PMI was particularly disappointing (see chart) and highlighted the weakness in the economy courtesy of the China slowdown and concerns that the US may initiate a trade war with the EU via autos and their components. The ratings agency, Fitch suggest there is a possibility that the ECB may need to re-commence their quantitative easing program by the end of the year.