Today marks the most interesting day of the data calendar this week. Central banks in the Eurozone (ECB), UK (BoE) and Turkey (CBRT) all announce policy decisions while US CPI (Aug) is released. The ECB and BoE meetings should be non events. The ECB is likely to confirm its €15 billion per month taper over Q4 18. The BoE monetary policy committee is likely have a unanimous vote for a hold.
The big move ought to come from Turkey. They will need to tighten to convince markets that the central bank it is free from political pressure and that it is ready to react to intensifying inflation pressures. A hike in the region of 300 basis points will be needed to convince markets. This would also provide some relief to other emerging markets.
The big news today is the offer of high level trade talks from US Treasury Secretary Mnuchin to meet with Liu He (China’s top economic official), ahead of the imposition of $200bn tariffs (that were supposedly going to be implemented at end Aug). This shows that the US administration is finally showing signs of cracking under pressure from businesses ahead of mid-term elections but I would take this with a heavy pinch of salt.
Mnuchin appears to be increasingly isolated in terms of trade policy within the US administration. Other members of the administration including Navarro, Lighthizer, and Bolton all hold a hard line against China. Last time Mnuchin was involved in such talks with China in May they were derailed by the hawks in the administration. So the talks could mark a turning point, but more likely they are a false dawn. That said it will provide some relief for markets today.