Global equity markets ended lower last week, after the US announced new tariffs on Chinese imports worth $50 billion, thereby intensifying trade tensions. UK markets ended the week in negative territory. On the data front, UK’s consumer price index (CPI) remained steady on an annual basis in May, recording its lowest level since March 2017. Additionally, the unemployment rate remained unchanged at its lowest level since 1975 in the February-April 2018 period. Moreover, monthly manufacturing production unexpectedly declined in April, marking its biggest fall since October 2012 and industrial production registered an unexpected drop on a monthly basis in April, recording its first drop in four months. Further, trade deficit unexpectedly expanded in the same month. On the contrary, the nation’s producer price index (PPI) rose in line with market expectations on an annual basis in May. European markets ended the week on a weaker footing. On the macro front, the Eurozone’s final CPI climbed meeting market expectations on a yearly basis in May. On the flipside, the region’s trade surplus narrowed to a six-month low level in April. Additionally, industrial production fell more than market anticipations on a monthly basis in April. Further, the ZEW economic sentiment index recorded an unexpected drop in June. Separately, Germany’s final annual CPI advanced in line with market forecast in May. US markets ended the week lower, amid escalating trade tensions between US and China. Data indicated that the US CPI jumped in line with market expectations on an annual basis in May, recording its largest gain since February 2012. Additionally, the annual PPI rose higher than market forecast in the same month, marking its biggest advance since January 2012. Furthermore, retail sales surprisingly climbed to a six-month high level in May. Asian markets ended mostly weaker last week.


Currency Update


The EUR ended lower against the USD last week, after the European Central Bank (ECB) decided to keep interest rates at record lows until mid-2019 and to end its bond-buying programme by the end of this year. The British Pound ended weaker against the greenback. The US Dollar strengthened against its major counterparts last week, after the US Federal Reserve's hawkish stance on future course of rate hike path and as the central bank's chief sounded upbeat on the US economy.



ECB raises inflation projections, cuts 2018 growth forecast and signals the end of bond-buying era


The ECB, at its June monetary policy meeting, opted to keep its key interest rate steady at 0.00%, in line with expectations. Further, the ECB signalled that it would reduce its monthly bond purchases to €15 billion after September and finally end them in December. Also, the central bank stated that interest rates could remain at their present low levels. Additionally, the bank raised its inflation forecasts for 2018 and 2019, but lowered its 2018 growth projection. In a statement post-meeting, the ECB President, Mario Draghi, stated that growth in the common currency region remained strong to overcome increased risk, justifying the bank’s decision to end quantitative easing.



The Week Ahead


Ahead in this week, investors will keep a tab on the Bank of England interest rate decision, UK’s CBI total trend orders and public-sector net borrowing along with manufacturing and services PMI across the Eurozone and Germany’s PPI for further cues. Additionally, the US MBA mortgage applications, current account balance, initial jobless claims, manufacturing and services PMI will attract significant amount of investor attention.



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