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31 July 2026, 08:35 UTC Chief Investment Office GWM Investment Research

Paul Donovan's daily audio: How to conduct monetary policy Audio Paul Donovan, Chief Economist, UBS GWM, UBS AG London Branch

Japan’s Ministry of Finance seemingly intervened in foreign exchange markets in defense of the yen. Such attempts to prop up a currency’s level only work in the long term if the weakness was caused by speculation, or if the temporary respite is used to correct the fundamental economic drivers of the weakness. This may have been more about the pace of weakness than any specific level.

The Bank of Japan left interest rates unchanged. The Bank of England left interest rates unchanged (with three dissents). Neither decision prompted a US-style sell-off in longer-dated bonds. Bank of England governor Bailey knows how to communicate with markets, and there is no need for a monetary policy uncertainty risk premium in UK government bonds.

Japan’s Tokyo consumer price inflation data was pushed slightly higher by energy prices (otherwise was as expected). European July consumer price inflation should be unalarming—the only place an imminent inflation threat appears to exist is in the imaginations of the ECB’s Bundesbank faction.

US Michigan consumer sentiment offers noise to markets. Yesterday’s income and spending data release showed the consumer doing OK, although wage and salary growth in the first two quarters of this year has been mediocre.

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This report has been prepared by UBS AG London Branch. Please see important disclaimers and disclosures at the end of the document.

Global asset class preferences definitions The asset class preferences provide high-level guidance to make investment decisions. The preferences reflect the collective judgement of the members of the House View meeting, primarily based on assessments of expected total returns on liquid and commonly known indices, House View scenarios, and analyst convictions over the next 12 months. Note that the tactical asset allocation (TAA) positioning of our different investment strategies may differ from these views due to factors including portfolio construction, concentration, and borrowing constraints. Attractive: We consider this asset class to be attractive. Consider opportunities in this asset class. Neutral: We do not expect outsized returns or losses. Hold longer-term exposure. Unattractive: We consider this asset class to be unattractive. Consider alternative opportunities Note: For equities, we have a five-tier rating system with two additional preferences Most Attractive: We consider this asset class to be among the most attractive. Investors should seek opportunities to add exposure. Least Attractive: We consider this asset class to be among the least attractive. Seek more favorable alternatives opportunities. When equities are included with the other asset classes in the three-tier rating system, we collapse “Most Attractive” with “Attractive” and “Least Attractive” with “Unattractive.”

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