The much-anticipated Trump-Putin assembly in Alaska is scheduled for 20.30 BST/21.30 CET, so any headlines could have the ability to influence late US buying and selling, but it surely’s fairly doable that the majority of the market response will solely materialise on Monday. President Trump has outlined this as a “feel-out” assembly and mentioned there’ll seemingly be talks with European allies and Ukraine after this summit. This implies that whereas we might see some draft plan for a ceasefire tonight, markets could deal with it with some warning, ING’s FX analyst Francesco Pesole notes.
Oil costs stay the important thing transmission channel to FX
“Trump has additionally mentioned there’s a “25%” likelihood nothing shall be agreed at the moment. That may be probably the most bullish situation for the greenback, which might in any other case nonetheless come below a bit extra strain from geopolitical danger unwinding. Oil costs stay the important thing transmission channel to FX. It’s undeniably onerous to foretell the end result of at the moment’s summit. However for now, we have now not seen a big impact on the greenback, which we nonetheless assume will stay primarily pushed by the US macro story over geopolitical developments. Yesterday’s sharp rise in PPI (0.9% month-on-month on each headline and core) was an enormous shock. PPI has a historical past of main CPI, and lots of elements feed into the Fed-preferred core PCE.”
“Markets are clinging to the September Federal Reserve reduce, maybe as that’s seen as making up for July’s maintain now that the roles image has modified so dramatically. However the December contract was repriced from -64bp to -57bp, and the two-year swap price rose 5bp. There’s a danger that this hawkish repricing has legs, which could offset the unfavorable influence of any Ukraine ceasefire settlement.”
“On the info aspect, we’ll watch retail gross sales figures for July at the moment, that are anticipated to take care of final month’s 0.6% tempo, the Empire Manufacturing index and the College of Michigan financial and inflation surveys. Additionally on the calendar are TIC flows, which have quite spectacularly defied hypothesis of a run from Treasuries up to now.”
