Hawks close in

Today's news headlines: 

‘Top Fed official warns massive bond purchases are ill-suited for US economy’. Eric Rosengren has voiced his concern with the Federal Reserve’s current pace of bond buying while pledging his support for the start of tapering as soon as September. The continued buying of Treasuries is no longer the correct remedy to current economic conditions, according to Rosengren, who pointed to a lack of supply rather than a lack of demand creating price surges in several developed economies. It’s expected another few strong job reports will help solidify the hawkish shift in the Fed with substantial progress made towards the 2% inflation target. (Financial Times)

‘UK inflation slows more than expected to 2%’. Price rises slowed in July as demand for clothing and recreational items fell. Headline Consumer Price Index (CPI) rose 2.0% annually, while Core CPI nudged under the 2.0% Bank of England interest rate target to 1.8% over the year. Currency prices had little reaction to this news, suggesting that this weakness has already been priced in given the BoE emphasis that inflation is transitory: a message that has been echoed by the Federal Reserve and the European Central Bank alike. (Financial Times)


Today

US markets stepped off yesterday as a downside surprise in Retail Sales knocked investor confidence. The S&P 500 closed 0.71% lower while the Nasdaq fell 0.93% on the day. A marginal decrease in the UK Unemployment Rate to 4.70% helped the FTSE 100 close 0.38% higher yesterday. Cable weakened around 0.78% yesterday, trading mid $1.37 this morning.

Events

New Zealand Official Interest Rate: 0.25% vs 0.25% previously
UK CPI y/y: 2.0% vs 2.5% last month
UK Core CPI y/y: 1.8% vs 2.3% last month
Canada CPI m/m: 1:30PM
US Housing Starts: 1:30PM
US Crude Oil Inventories: 3:30PM
FOMC Meeting Minutes: 7:00PM

Interbank rates:

GBP/USD – 1.3746
GBP/EUR – 1.1727
EUR/USD – 1.1721
USD/CAD – 1.2607

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