Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Boris Johnson has started his reign as prime minister with a brutal cabinet cull. He promised on Tuesday to steal leadership rival Jeremy Hunt’s ideas, but he did not want him in his cabinet. In the top jobs are chancellor Sajid Javid, home secretary Priti Patel and foreign secretary Dominic Raab. Keen Brexiteer Andrea Leadsom is head of the business department, and will likely strike a somewhat different tone to predecessor Greg Clark.

“Revenge” is the word on our main story this morning. You can read about it in all its gory detail here, as Britain prepares for what could be the hottest day ever.

Barring any early interventions on Brexit from Johnson (and it’s tricky to see at this point how he could take a harder line on a no-deal Brexit than he already has) the major economic news for the day will almost certainly be the European Central Bank’s latest monetary policy announcement.

And, oh, how times change. A year ago most economists believed that ECB president Mario Draghi would preside over at least one interest rate hike during his time in the chair. Now those same economists are weighing whether the ECB’s rate-setting governing council will today signal an intention to cut interest rates at its next meeting in September – or whether it could take the plunge today with a new round of economic stimulus.

“The case for further ECB easing was reinforced yesterday by the release of weaker than expected eurozone PMI surveys for July,” said Lee Hardman, a currency analyst at MUFG Bank.

It is another disappointing signal for the ECB whohad previously hoped that growth would begin to pick up in the second half of this year. They are now becoming increasingly resigned to a more protracted economic slowdown.

The ECB response could involve a smaller rate cut than usual, and even a reacceleration of quantitative easing, the bond purchases which have been such a big feature of monetary policy in the last decade.

Frederik Ducrozet

Chances of a rate cut today have risen substantially after this week’s PMIs and BLS. But the bigger question is about QE – watch out for Draghi’s comments about (SPF) inflation expectations. https://t.co/Rna7GM07Qf

July 25, 2019

Draghi leaves the ECB on 31 October, meaning he will probably have gone through eight years in which the central bank has provided constant stimulus to the eurozone economy.

Back in the UK, there is some big corporate news in the defence sector, as Cobham – the Dorset-based maker of military and civilian aerospace systems – is snapped up by US private equity group Advent International for £4bn. The 165p per share offer represents a 50.3% premium to the average share price for the last three months.

The agenda

  • 9am BST: Germany Ifo business confidence (July)
  • 11am BST: UK CBI distributive trades (retail) survey (July)
  • 12:45pm BST: European Central Bank (ECB) interest rate decision
  • 1:30pm BST: ECB press conference with Mario Draghi
  • 1:30pm BST: US durable goods orders (June)


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