Federal Reserve still waits for economy slowdown – UBS

US markets are closed as the country celebrates its attempt to escape rule by a monarch. There has been media speculation about US President Biden’s candidacy for re-election. Markets are not likely to react to such speculation at this stage. Politically, markets primarily focus on the probabilities of economic policy change, notes UBS’s macro analyst Paul Donovan.

Markets expect two more ECB rate cuts this year

“The UK is demonstrating the stability of the democratic process under a constitutional monarchy with its general election. Markets, rightly or wrongly, think that they know the likely outcome and are unlikely to react strongly (especially today with a media blackout until the polls close).”

“The Federal Reserve (Fed) minutes of the June meeting suggested a desire for more evidence of cooling inflation before cutting rates. Some economists (including this economist) are getting frustrated. Harmonized inflation is below 2% and there is deflation for almost every sector of the economy somewhere in the US. How much more slowdown is required?”

“The European Central Bank (ECB) publishes an ‘account’ of its meetings, which sometimes feels like reading an interminably long anecdote without a punchline. Investors are comfortable with the idea of two more rate cuts this year, following inflation lower. German May factory orders were weaker than expected (they have been below expectations all year).”