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US Open Preview – Dollar marches higher as yen retreats; US CPI inflation & Brexit plan eyed
July 12, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day ahead: US yearly CPI figures to rise further; Brexit White Paper in focus
The focus will switch from trade tariffs to inflation in the next few hours as investors will be interested to see whether CPI figures out of the US have the strength to push the rising dollar even higher.
At 1230 GMT, the US Bureau of Labor Statistics is expected to show that US consumer prices have grown by 0.2% m/m in June – the same as in May –, while year-on-year the headline CPI gauge is anticipated to inch up by 0.1 percentage points to 2.9%. The core equivalent, which excludes food and energy, is also projected to edge up on a yearly basis, increasing to 2.3% from 2.2% in the preceding month. While the measure is not the Fed’s favorite – that is the core Personal Consumption Expenditure (PCE) index – CPI figures are used by policymakers to identify trends in inflation as well. Should the numbers beat forecasts, hinting that inflationary pressures in the US are heating up and therefore further rate hikes in the year could be comfortably applied, the greenback could hit fresh highs and even challenge the 113 handle against the yen. On the other hand, a miss in data could see the dollar reversing lower. Separately, any updates on trade tensions have the capacity to trigger moves in the market as well.
Initial jobless claims out of the US for the week ending July 6 will also come in light at the same time, though, the dollar typically shows little response to these data.
Meanwhile in the UK, headlines on the Brexit front will attract the most attention. May’s proposals on the UK’s future relationship with the EU, which were presented to UK ministers on Friday and forced the resignation of David Davis (UK’s Brexit negotiator) and Boris Johnson (UK’s foreign minister), will be explained in detail in a 100-page White Paper today, with scope to bring fresh volatility to the pound. Should the details reveal a “workable” and “realistic” UK plan that makes a “smoother Brexit” more realistic, then the pound could benefit. The opposite holds true as well.
In Brussels, the two-day NATO summit will conclude today but it seems that Trump’s continuing criticism of the group’s defensive spending plan and trade practices have tensed talks, calling unscheduled meetings. The US President will also fly to the UK today to meet the British Prime Minister.
As for today’s public appearances, at 1100 GMT, a meeting between the US Secretary of State Mike Pompeo and EU Foreign Policy chief Federica Mogherini will attract some attention amid escalating global trade tensions. Later at 1415 GMT, Philadelphia Fed President Patrick Harker, a non-voting FOMC member on 2018, will be making comments at 1415 GMT.
In equities, Delta Air Lines will be releasing its quarterly results before today’s opening bell on Wall Street.
Early on Tuesday at 0445 GMT, Chinese trade stats for the month of June and more importantly China’s trade balance with the US will keep Asian traders busy.
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