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US Open Preview – Pound touches 10-month low after UK inflation misses forecasts; dollar unlocks fresh highs
July 18, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day ahead: Powell testifies before the House Financial Services Committee; US housing data & Australian jobs report pending
The Fed chief, Jerome Powell, will be testifying before the House Financial Services Committee at 1400 GMT today, telling the Senate Banking Committee on Tuesday that the US economy is “growing considerably stronger” to absorb higher interest rates this year even under rising trade risks. Following the testimony, traders will be closely listening to the Q&A session which could find lawmakers challenging Powell’s bullish tone yesterday. A few hours later at 1800 GMT, the Fed will separately publish its Beige Book which tracks the health of the economy based on the its own sources across the nation, while prior to Powell’s speech, US data on building permits and housing starts due at 1230 GMT could bring some volatility to the dollar as well. Analysts believe that building permits increased by 1.33 million in June, slightly less than in May when the figure posted an increase of 1.30mn. Housing starts, however, are expected to ease, falling from 1.35mn to 1.32mn.
In other data releases of notice, Japan is scheduled to release trade stats for the month of June at 2350 GMT. While exports are expected to grow at a slower pace of 7.0% y/y compared to 8.1% in May, imports could post a steeper slowdown, expanding by 5.3% y/y after recording an expansion of 14.0% in the previous month. A fact that could turn the trade balance positive as analysts predict, from -580.5bn yen to 534.2bn yen. Japan’s trade balance with the US and the EU separately could attract greater interest as the country has been subject to US tariffs on Japanese steel and aluminum imports since early June, with Japan refusing to accept a bilateral trade partnership as the US desires, while trade with the EU could operate under fewer restrictions in the future if the EU and the Japanese parliaments approve one of the biggest free trade deals in the world signed between the sides yesterday. Still, as the yen tends to be relatively less sensitive to data releases, the currency is not expected to react much in the wake of the data.
Meanwhile in Australia, investors will be waiting for June’s jobs report early on Tuesday at 0130 GMT, which could show that the unemployment and the participation rates stood unchanged at 5.4% and 65.5% respectively. The number of employees, though, could increase by 17k, more than the 12k rise tracked in May. While wage growth is what the RBA mainly wants to see rising, minutes from its latest policy meeting showed that policymakers are optimistic that a tightening labor market could eventually drive earnings higher, helping the indebted citizens to cover their liabilities and at the same time for inflation to accelerate towards the RBA’s price target.
In oil markets, the Energy Information Administrations will issue its weekly report on US oil inventories at 1430 GMT. Yesterday, API figures indicated an addition of 0.62mn barrels in US crude oil stocks, pushing oil prices downwards. Should EIA numbers identify an increase or a smaller decline than analysts are forecasting, the market could face stronger downside pressure. For the week ending July 13, projections are for a fall of 3.622mn barrels compared to a loss of 12.63mn in the preceding week, the largest downfall since September 2016.
In equity markets, earnings season continues with American Express, Alcoa, eBay, IBM being among companies releasing quarterly results after the market closes today.
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