Prime Minister Johnson has said that he believes a good deal can be agreed between the UK and EU over post-Brexit trade but believes that the UK should be able to make and follow their own rules rather than following EU regulation. He also suggested that if a deal cannot be agreed to then there are other viable options. In response, German Chancellor Merkel has mentioned that the EU is preparing for any outcome of the trade negotiations including a no-deal Brexit. The Pound has held on to the majority of its gains against the Euro but struggled against a stronger Dollar.
German Chancellor Merkel is due to meet Dutch Prime Minister Rutte to discuss a compromise over the proposed EU recovery fund on Thursday prior to the EU summit which is scheduled for the 17th-18th July. Merkel has called the negotiations ‘rocky’ which has put the market on edge. ECB policymakers are reported to be in disagreement over how much of the PEPP economic stimulus bill should be fronted by countries that have been the most affected by the pandemic such as Italy. Overall, the Euro is trading in a range until further comments regarding the recovery fund and PEPP are reported.
FOMC member Bullard has said that the risk of another financial crisis still remains and pointed towards public health measures in order to help avoid this. The Federal Reserve are trying to decide if they should give further forward guidance with regards to the future interest rate path in the US in order to reassure investors. The Dollar remains strong due to its safe-haven status with the number of coronavirus cases in the US rising. US final services and ISM non-manufacturing PMI figures are due this afternoon which could cause some short-term volatility.