[Trade War 'Relief', Key Rate Decisions and Apple Earnings - DailyFX Key Themes]

On 7/30/2018 at 11:54 AM, 247trader said:

Interesting regarding Thursday rate rise if I’m honest. I don’t get how we’re looking at this 80% odd likelihood of a rate rise coming whilst economists are split on the effect it’ll have. The effect is surely the reason for the action... 

saw this is city am “While most City observers now think rates will rise, economists are split as to whether hiking borrowing costs amid a weak economy – and shortly before the biggest political upheaval in 40 years – is the right course to take.”

if it isn’t the right course then why have such a solid expectation or a rate rise? 

The figures which have been coming out recently haven’t really supported this in all honesty? All the figures last week aswell... I thought we’d be more split. 

It certainly can be argued that the BoE shouldn't have hiked rates owing to the subpar showing on the standard mix of fundamentals they look for when they deliberate such actions. That said, I think the circumstances for policy currently are such that they cannot follow standard procedure. 

Though their mandate is to target inflation, there are many long-term factors that go into a steady bearing of medium-term (their term for roughly 2 years forward) price stability and there are is an underlying interest to promote economic activity and maintain financial stability. 

A rate hike of 25 basis point from practically zero is not going to carry a material effect one way or the other - cause significant economic trouble nor alleviate it. 

Further, Brexit presents considerable uncertainty in terms of growth, but it can also stoke inflation through financial costs and for more expensive imported goods among other factors. 

Then there is the environment for which monetary policy is being employed globally. The Fed is unique in that it is hiking well beyond the tempo of any other authority, but there is a move to normalize globally. If they were to hold at the extremes while others have normalized, it would incur problems for fighting future financial/economic troubles as they arose.

As it stands, Japan is likely to find itself in an untenable situation should global conditions take an unfavorable tack. I think some of the more market savvy participants of the MPC are worried about this strategic risk. 

[Trade wars, brexit and the Fed - DFX key themes]

Thanks all for the feedback. I am actually based in Chicago, but you're right; usually don't start doing updates until towards the dying hours of London trade. However, this I usually write over the weekend and get out before the Asian markets start to trade. 

I have done these mainly for internal purposes; but James said they'd be useful here as well, so will drop them in the community blogs regularly as well. 

Good luck trading all!