Boris Johnson beat Jeremy Hunt during July to become the new leader of the Conservative Party and the UK’s new Prime Minister. The new Government’s harder-line approach to Brexit – and the increased prospect of no deal – sent the pound plummeting against the US dollar and the euro during July.
- The Fed cut US interest rates for the first time in a decade
- Expectations of looser monetary policy in Europe intensified
- Unrest continued in Hong Kong
Boris Johnson beat Jeremy Hunt during July to become the new leader of the Conservative Party and the UK’s new Prime Minister. The new Government’s harder-line approach to Brexit – and the increased prospect of no deal – sent the pound plummeting against the US dollar and the euro during July. Michael Gove, who is tasked with preparing for a no-deal Brexit, warned that the prospect of no deal is now “very real”. In an article in the Sunday Times, Mr Gove insisted: “No ifs. No buts … Brexit is happening” and, although the Government still hopes the EU will be prepared to reopen discussions, Mr Gove said they must “operate on the assumption that they will not”. Despite the uncertainty, the FTSE 100 Index rose by 2.2% during July.
“No ifs. No buts … Brexit is happening” (Michael Gove)
As expected, the Federal Reserve (Fed) implemented its first cut in interest rates since December 2008, reducing its key federal funds rate by one-quarter of a percentage point to a range of 2-2.5%. In its statement, the central bank cited uncertainties to the outlook, including the impact of “muted” inflation pressures alongside the implications of broader global developments. Economic growth in the US lost traction during the second quarter of 2019, as trade conflict between the US and China took its toll on export growth. The economy expanded at an annualised rate of 2.1% during the period, compared with first-quarter growth of 3.1%. The Dow Jones Industrial Average Index rose by 1% over July as a whole.
Prospects for growth in the eurozone have continued to deteriorate, according to President of the European Central Bank (ECB) Mario Draghi, who said that fiscal policy would be “of the essence” if the outlook continued to worsen. His words stoked expectations for further monetary easing, perhaps as early as September. During July, Germany’s benchmark Dax Index declined by 1.7%.
Sentiment amongst large Japanese manufacturers has continued to worsen, according to the Bank of Japan’s (BoJ’s) latest quarterly Tankan survey. Corporate confidence has been undermined by the impact of the trade conflict between the US and China, and by broader concerns about a slowing global economy. The Nikkei 225 Index rose by 1.2% over July. Meanwhile, unrest continued in Hong Kong over the controversial extradition bill, and the Hang Seng Index fell by 2.7% during the month.