Market movers today

Today, HICP inflation from Spain and Germany for June will be in focus. We look for Spanish inflation to have dropped to 1.4% y/y (consensus: 1.5% y/y) from 2.0% in May. In Germany, we are in line with consensus at 1.3% y/y from 1.4% in May. The drop in June inflation is estimated to have been driven by lower energy prices. Italian HICP inflation released yesterday further suggests that food price inflation had a lower contribution in June and it gives downside risk to our estimates for today’s releases.

In the euro area, business confidence data is due to be released by the EU Commission. It normally mirrors what we see in PMI and regional business surveys – so not much new information in this.

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In the US, it is time for the weekly jobless claims. It has been hovering around 235-250,000 since March, pointing to a quit e robust labour market with few layoffs. The Fed’s Bullard is due to speak tonight on monetary policy.

In the Scandies, focus will be on Swedish retail sales and household lending.

Overnight Japan will be releasing CPI and Chinese official PMI manufacturing for June is also due.

Selected market news

Bank of England Governor Mark Carney joined the ECB’s Mario Draghi in talking about the necessity t o remove some stimulus at yesterday’s Sintra conference. In addition to Draghi, who elaborated further on Tuesday’s hawkish comment s, t he Bank of Japan’s Governor Haruhiko Kuroda and t he Bank of Canada’s Governor Stephen Poloz at tended the conference. The latter two did not provide any new information about monetary policy. Indeed, it is quite significant to see Carney now placing himself in the hawkish camp as he has until recently argued that an unchanged policy stance would be appropriate for now. Notably, the BoE Chief Economist Andrew Haldane last week said that he had changed his mind. In addition, we already had three dissenters favouring rate hikes at the latest BoE meeting. Clearly, the balance in favour of a hike on the MPC looks set to start tipping and is clearly challenging our call that BoE will stay unchanged during Brexit negotiations.

The growing consensus among major central banks about the need for tightening monetary policy has not deterred risk sent iment in financial markets. Stock markets are holding up across the US, European and Asian market and so are commodity prices. Hence, the main impact in sentiment has been in FX and fixed income markets, where short -term rates have risen, giving support to EUR and GBP – see more on next page.

The weekly US oil inventory report showed a 118kb increase in US crude stocks. The report also showed a decline in both implied crude demand and implied gasoline demand. Finally, there was another 1.4mb draw on the strategic petroleum reserves last week. The combination of weak implied demand and the additional oil flowing to the market from the strategic reserves will continue to keep a lid over oil prices in the short term, in our view.

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