- Last week’s downside surprise in the US June CPI print amid a gradual cooling of the labor market has prompted many analysts to expect the Federal Reserve to cut interest rates twice this year. The market is currently pricing September and December moves, followed by three cuts in 2025. After falling last week, the US dollar is a touch firmer this morning, as the odds of a Trump victory in the Presidential election have increased after the assassination attempt over the weekend.
- US data in the coming days includes the Retail Sales release for June which is expected to show a third straight month of weak spending as consumers remain wary of overspending amid high interest rates and a cooling labor market. We have housing data over the course of a few days and Wednesday sees the release of Industrial Production data which is likely to be soft after the downside surprise to June PMI’s. The Fed’s Beige Book is also out on Wednesday allowing markets and FOMC officials to assess activity and labor market conditions ahead of the policy meeting at the end of the month.
- In the UK, Wednesday’s inflation report will be eagerly awaited with the headline rate expected to have dropped again in June to 1.9% from 2% in May. Thursday’s employment market data is expected to show that cost pressure in the economy is softening. Private sector pay gains have previously been sticky, however analysts expect them to resume their downward trend more firmly inline with BoE projections.
- The ECB is almost certain to leave interest rates unchanged at their meeting on Thursday, with President Christine Lagarde likely to once again hint at a September cut. We also have Euro area Industrial Production (Mon), German ZEW (Tue) and final CPI inflation (Wed) on the docket this week.
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