Market movers today
A key focus today will be inflation releases in the eurozone and the US, while the EU summit discussion in Brussels will be in focus notably with German Chancellor Merkel under pressure to bring back an EU-wide agreement on immigration.
In the eurozone, the June HICP figures are due for release. Headline inflation surprised on the upside in May, reaching 1.9% y/y, driven by higher oil prices. This has led the ECB to revise up its inflation forecast for 2018 to 1.7% (from 1.4%) in its new staff project ions (see also ECB Review, 14 June 2018). We estimate the June figure at 2.0% y/y, but emphasise that headline inflation will only remain at this level for a few months before declining back to around 1.5-1.6% as the energy price base effects wear off. We expect core inflation to remain unchanged at 1.1%.
In the UK, GfK consumer confidence is being released. Lloyds business barometer and not least the final revision to the Q1 GDP estimate are probably not market movers as such, but might attract some at tent ion as the Bank of England has left the door open for a rate hike in August depending on data in Q2. (See Bank of England review: BoE leaves the door open for an August hike,, 21 June, for details).
In the US, PCE core inflation numbers for May will be released today. Based on CPI, we expect PCE to rise +0.2% m/m, which translates into 1.9% y/y, up from 1.8%. We still believe there are upside risks to US inflation, which underpins our view of a total of four rate hikes being more likely.
Selected market news
Italy’s Prime Minister Giuseppe Contethreatened to veto the European Union summit conclusions, while the EU stand-off deepened in Brussels on large discussions over migration. The move could jeopardise Germany’s Chancellor Angela Merkel coalition back home. At the summit , the UK Prime Minister Theresa May blamed the EU for hindering a large Brexit deal on security.
Russia’s Vladimir Put in and US President Donald Trump will meet on 16 July in Helsinki, both the Kremlin and the White House announced. Bilateral relations and security issues will be discussed.
Most of emerging markets (EM) currencies and stock tumbled further on Thursday, depressed by cont radictory messages on global trade wars from the US. The Trump administration seemed to retreat from a full scale trade war with China. Yet , the Director of the National Economic Council under the US President Trump Larry Kudlow stated afterwards that Trump was not getting any softer on China. The INR slid to all-time low, the IDR weakened to a three-year low, the decline in the CNH accelerated and the ARS turmoil deepened.
