The ECB meeting is approaching and change may be significant

The ECB is expected to take test trials on the outcome of its monetary policy at its next week's meeting, which may end with publicly announcing the plans when we will see an exit from this policy.
It is very likely that ECB President Mario Draghi will use the June 14th summit in Latvia as an opportunity to discuss the end of the buy-back program, according to market observers.
Currently, bond purchases are scheduled to take place at least until September. However, there is no more clarity about the time of their end, which brings serious uncertainty among market participants.
And many market observers see a good time at the ECB meeting to "prepare the ground". Dearly, it is possible to use the press conference to signal that a decision on the end of the stimulus could come at the July meeting of the bank.
Even if the topic is concerned, there would be serious progress on the way out of the incentives, comment market observers.
The June decision may also be accompanied by new economic forecasts on the euro area by the ECB, which also give some signals to investors. If the forecasts are good, investors may decide that we will see a recent exit from the incentives.

Shares may collapse unless Yellen produces a miracle

The Fed has confirmed its position that it will begin to reduce its record $4 trillion balance sheet this year. This, however, did not bother particularly the stock markets, as the Dow blue chip index this week set a new record.
Are investors thinking that the Fed can withdraw liquidity from the market without affecting the companies? Obviously yes...
Otherwise, they would have to worry, not to buy shares "as the last one." Investor memory has proven not once and twice that it is short-lived and quickly forgets.
The traders apparently forgot what the asset redemption program is, which is the main reason for the Fed's record balance.
The question arises if the incentives triggered strong and parabolic growth for the indices, why not take the opposite - a reduction in the Fed's balance sheet could lead to a strong correction for US indices?

The Bank of England is preparing for the worst

During the last meeting of the Bank of England, the regulator did not disappoint those who counted on the generous incentives. The regulator has reduced the expected rate by 0.25%, while enhancing the program of buying assets to 375 billion up to 435 billion pounds. Surprisingly, it was the decision to buy not only the state, but also corporate bonds. The program will be applied within 6 and 18 months, respectively.
GBP/USD naturally weakened in response to the verdict of the monetary authorities, having lost the level of 1.32. The pair found support on the way to the level of 1.31, and is still under pressure.
In the aspect of longer-term prospects for the British currency, we should pay attention to the attitude of the Central Bank.
Firstly, the Central Bank sharply lowered its economic growth forecast for 2017 to 0.8%, while in May, GDP was expected at 2.3%. Such a grim assessment, combined with the increasing talk about a technical recession, create unfavorable conditions for the pound. Secondly, M. Carney made it clear that he is ready to further easing of policy in the future. It raises the issue of divergence rates of monetary policy of the Bank of England and the Federal Reserve. And although the issue of the next rate hike in the United States is still shrouded in fog, it is important to remember that in the United States we are talking about the normalization of monetary policy, but the British regulator after today's "warm-up" paves the way for further action in this direction.
The closest factor that may affect the expectations of the Fed's rates will manifest itself tomorrow and will have an impact on the dynamics of the GBP/USD and the dollar as a whole. Strong key report on the US labor market will strengthen the position of the US currency across the board. In this scenario, the pressure on the pound will continue and may worsen. Otherwise, we expect a restoration of the pair above the level of 1.32.

Fiscal stimulus in Japan disappointed

In Japan Prime Minister's Shinzo Abe long expected fiscal stimulus was finally disclosed. The cabinet approved on Tuesday a package of spending and loans totaling 28 trillion yen (about 275 billion dollars). The government announced their plans days after the central bank adopted a modest increase of their incentives.
IMF determine the increased costs as slightly improving the prospects. The Fund welcomes the decision of BoJ expansion of the incentives.
The government may issue 40 year government bonds worth 100 trillion yen to finance the budget.
Dollar/yen fell because of fiscal incentives and dealers continued to close long dollar positions. Short-term resistance is at 101.50 and the major support is 100.

The dollar fell, the yen rose after data on the US economy and the Bank of Japan decision

The dollar fell, the yen rose after data on the US economy and the Bank of Japan decision

The dollar fell on Friday after the release of US GDP, which growth is at a slower pace than expected in the second quarter, further weakened the expectations of the new US Federal Reserve raising rates in September.
At the same time, the Japanese yen strengthened after the Bank of Japan expanded its stimulus measures by the end of the two-day meeting, but disappointed investors who expected a more ambitious action in support of growth and inflation.
The yen jumped by 3.08% to 102.03.
The Bank of Japan expanded its stimulus measures on Friday, doubling the volume of purchases of securities exchange-traded funds (ETF) because of pressure from the government and financial markets, but disappointed investors who were waiting for more decisive action.
However, the central bank said that will conduct a thorough assessment of the impact of negative interest rates and large-scale program of buying assets that can point to a large-scale revision of the incentive measures.

The markets took a break in the growth of expectations on stimulus

The recovery rally after Brexit was based on the belief that central banks around the world once again will print out incentives to restore the normal functioning of financial markets. Paradoxically, without the market turmoil, central banks prefer to wait for economic data to weigh the need for incentives.
Slightly discouraged, that central banks are in no hurry to soften even more the policy, but not giving up, the markets have stalled in recent days near the local maximums. The second false start of the markets (the first was before the referendum on Brexit) is broke into the reality: relying solely on past experience, the markets can be wrong.

Comments of Sberbank CIB on incentives

The positive mood in the market is a result of a combination of impulses coming from the leading economies in the form of incentives, say analysts.
According to recent data the Japanese Prime minister Shindzo Abe planned package of fiscal stimulus to the economy in the volume of 20 trillion yen, as in the discussion of policy initiatives will participate former head of the Federal Reserve Ben Bernanke (the adoption of the decision was scheduled for July 29).
In addition, investors welcomed the quick nomination of Theresa May as prime minister of Britain. It came om Tuesday. At the same time the Bank of England last Thursday announced the easing of monetary and credit policy, such action by the ECB can be expected in the third quarter.