The United States Dollar, in the absence of any major data drivers, is trading, once again, close to flat at this morning’s open, with very little movement through yesterday’s session as well.
Overview
News flows are being dominated by US-China negotiations, set to continue for a second day today. The US delegation has given some vaguely positive sound bites, but with little concrete importance in the way of announcements from talks yesterday, traders are very decidedly in “wait-and-see” mode ahead of any compromises announced between the world’s two largest economies. The Administration continues to say that China is ‘very tough,’ but investors remain cautiously optimistic that there is common ground to be found during these extended negotiations.
Overall, though there are two data releases of US CPI and PPI due out later this week, markets seem to have fully entered the ‘summer slump’ of lower volumes and lower volatility. US stock futures, as well, are close to flat this morning after an unremarkable session yesterday. Emerging markets, though, are seeing a bit more action as traders look toward optimistic signals out of US-China negotiations to drive risk assets positively. The MSCI index for developing market stocks is set to extend its rally to a sixth straight day, though EM currencies are trading mixed. As for G10 assets, it’s clear markets will need a bigger trigger or real surprise to get price action moving in a substantial way again. The Dollar’s volatility range has shifted higher over the last few sessions, suggesting that there may be a touch less bearish momentum than we’ve seen recently, but this has yet to materialize in its pricing against major currencies.
With no major data releases on the calendar around the world today, the US CPI tomorrow does provide a chance to jolt markets out of their current slumber. Expectations are for a 0.2% price increase month-over-month, and a 2.5% increase annually, but any downside or upside surprise may give traders the boost they need to choose a direction for the back half of the week.
What to Watch This Week…
- US CPI, Wednesday 8:30 AM
- US PPI, Thursday 8:30 AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The single currency, though trading a touch higher against USD this morning than at yesterday’s close, remains range-bound as trading lacks a clear catalyst to move in either a strong positive or negative direction. European Central Bank Governing Council member Francois Villeroy de Galhau spoke early this morning and said that the ECB is “in a favorable ‘2 and 2’ zone,” as inflation forecasts are now at 2% for this year and the central bank after cutting interest rates last week has its key rate at 2% as well. He did note, though, that the central bank will remain “as agile as necessary.”
GBP ⇓
Pound Sterling is the worst performer in the G10 this morning, losing a third of a percent of ground against the Buck. Tax data released this morning showed that UK payrolls contracted by a shocking 109,000 in May, which is the biggest payroll decline in 5 years since the height of the COVID pandemic. Wage growth also slowed more than forecast, and unemployment rose by 0.1% to 4.6%. As a result, UK gilts rallied and traders are now fully pricing in two 25-basis-point cuts from the Bank of England through this calendar year.
