Financial markets soared in European session amid expectations that central banks would add stimulus to boost global economic recovery. Crude oil prices were also buoyed as the EU sanctions over Iranian imports has become effective this week. The front-month contract for WTI crude oil jumped to 85.6 from yesterday's close of 83.75 while the equivalent Brent crude contract surged to 99.36 from 99.34 yesterday. Iran is reported to be drafting a bill to close the Strait of Hormuz.

Ahead of the ECB meeting on Thursday, speculations that the central bank would announce a rate cut intensified as recent data showed that the economy 17-nation bloc remained under pressure. Besides the main refinancing rate, the ECB might also adjust the lending rate and the deposit rate, standing at 1.75% and 0.25% respectively. Should the central bank lowers the deposit rate, banks would probably encouraged to lend money to each other rather than just keeping the money at the ECB.

The RBA maintained the cash rate unchanged at 3.5% in July. This is a well-anticipated decision after rate cuts in both May and June. The central bank acknowledged improvements in domestic economic outlook and maintained previous outlook on inflation. Yet, policymakers continued to worry about the situation in the Eurozone, stating that more recent indicators continue to suggest weakening in Europe and Europe will remain a potential source of adverse shocks for some time. Since November last year, the RBA has cut the cash rate by -125 points and this was viewed by the central bank as material easing in monetary policy. While there's no bias indicated in the statement regarding further monetary stance, we expect further rate cut later this year as the RBA has the highest rates among major central banks while relative strength in the Australian dollar remained a concern.

In response to EU's sanction over it oil exports, a committee member of Iran's National Security and Foreign Policy Committee stated that a bill has been drafted so as to close the Strait of Hormuz for shipment by oil tankers. The Iranian government plans to use the bill to block oil tanker traffic from shipping oil to countries that have sanctioned Iran. The effect on oil supply as the sanction takes effect may be bigger than previously anticipated. Currently, Goldman Sachs estimated that Iran's crude exports may fall to about 1M bpd.