This week will revolve round two main occasions: Tuesday’s US inflation report and Friday’s assembly between US President Donald Trump and Russian President Vladimir Putin in Alaska. Consensus is anticipating one other acceleration in core CPI, to 0.3% month-on-month (3.0% year-on-year), on this week’s July print. That could be a quantity that may in all probability be seen as acceptable for the Federal Reserve to proceed with a September reduce (90% priced in), given the backdrop of a considerably weaker jobs market. We forecast a 0.4% MoM core print, which might place higher emphasis on subsequent knowledge and will restrict additional dovish repricing within the close to time period, although shouldn’t materially reverse September reduce bets. From an FX perspective, we count on Tuesday’s print to provide the US Greenback (USD) some short-lived help, which ought to wane as soon as different knowledge verify jobs and exercise slack, ING’s FX analyst Francesco Pesole notes.
Any settlement reached on Friday may solely be preliminary at finest
“On the US-Russia summit, the consensus of political analysts and most media stories means that Putin is keen to conform to a ceasefire solely with substantial territorial concessions from Ukraine. Trump’s fundamental leverage seems to be the specter of sanctions and protectionist strain on Russia’s buying and selling companions, akin to India. The extent to which Russia’s financial slowdown may compel concessions, or how far Trump is keen to push for a beneficial territorial settlement, stays unsure. The absence of Ukraine and European representatives on the summit suggests any settlement reached on Friday ought to solely be preliminary at finest.”
“Crude oil costs function a helpful barometer; they’ve declined 8% since early August, reflecting tentative optimism relating to a truce. Ukraine’s 10-year bonds have rallied 2% over the identical interval. Ought to a ceasefire materialise within the coming weeks, the euro is more likely to carry out properly, primarily towards the greenback, yen, and Swiss franc. Nevertheless, given the numerous discount in developed foreign money markets’ sensitivity to vitality costs and the Ukraine battle since 2022–2023, we’re not it as a seismic occasion for FX.”
“US knowledge and Fed-related developments ought to stay the greenback’s major drivers. Alongside the CPI report, key releases this week embrace the NFIB survey (Tuesday), PPI knowledge (Thursday), and retail gross sales (Friday). Fedspeak will even be crucial as markets digest the implications of the substantial July jobs market revisions. An empty calendar and the proximity to tomorrow’s CPI could hold FX markets in a quiet, wait-and-see method for at present.”
