Powell sparks optimism on rate cuts

In European markets, there is a positive sentiment, mirroring Asia’s risk-on session, attributed to Fed Chair Powell’s remarks indicating that interest rate cuts may be imminent in the U.S. The French election results remain a focus point as opponents are trying to prevent the far-right National Rally party from winning the upcoming run-off election. Despite a two-week high in euro value on Monday, it stabilized at $1.074475, and market indicators suggest the STOXX 600 index may move away from its two-month low.

Fed Chair Powell affirmed the U.S. being on a “disinflationary path” but cautioned that more data is essential before any potential rate cuts could be made. Investors are optimistic, with 2 rate cuts predicted from the Fed this year, based on this assumption. The minutes of the Fed’s June meeting are to be released later today, which could shed light on the central bank’s perspective regarding U.S. rates.

In contrast, the ECB exhibits no urgency to further lower borrowing costs after implementing a rate cut last month. Data suggests that the services component in eurozone inflation remains persistently high, raising questions about the timeline for future rate cuts. ECB’s Christine Lagarde and Philip Lane are slated to speak at a conference in Portugal, which may influence market trends in light of rate expectations. Currently, traders are pricing in 43 basis points of cuts from the ECB this year.

Tesla reported a smaller than anticipated 5% decline in vehicle deliveries during the second quarter, despite some drop in demand. The electric vehicle sector still faces challenges ahead, according to market analysts. Key economic events scheduled for tomorrow include the June PMI for various countries such as France, Germany, the UK, and the eurozone. Noteworthy speakers at an ECB forum in Portugal include Fed’s John Williams and ECB’s Christine Lagarde and Philip Lane, who may provide insights about the monetary policy stance for their respective institutions.

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