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Will US inflation send EURUSD below parity?

Good morning

UK GDP this morning rose by more than expected in May, coming in at 0.5% from an expected 0.1%. Industrial production numbers also beat expectations and GBP did take some comfort from the release, GBPUSD trading up from 1.1895 to 1.1935 initially, now 1.1925. GBP has also risen against EUR with EURGBP now 0.8420 (GBPEUR 1.1875), the highest level since May. On the subject of EUR, somehow EURUSD didn’t drop below parity yesterday despite trading to within a pip or so of that key level, leading some to question whether there had been any ‘official’ buying down there. With EURUSD now 1.0025 it’s off the lows but still within touching distance of 1.0000.

Its not great in Europe at the moment. German ZEW yesterday was well below expectations and inflation this morning was bang in line. Reuters reports Germany will stop buying Russia coal at the end of this month and stop buying Russian oil at the end of this year. Italy’s Draghi talked of many risks to the Italian economy, adding the he will not lead the government if five-star leave the coalition. Talking of governments, eight candidates made it through to the next round of voting for Tory party leader, Sunak still favourite but with Mordaunt a very close second. Each candidate needs 30 votes today to stay in the running, results expected around 5pm london time.

RBNZ did raise rates by 50bps as expected but NZD found no support, trading 30 pips lower against USD and NZD after the announcement despite the promise of more rate rises in order to keep inflation down.

China trade surplus, out a little later than planned, came in at a whopping $98 billion, up $23 billion from last month on higher exports. I’m not sure the US will be keen to cut tariffs with numbers like that.

US inflation is the key release today. A report did do the rounds yesterday that showed the headline up at 10.2%, this was quickly branded as fake, but not before stocks had traded lower as the news worked its way round the markets. We know some economic announcements are released before embargo but this really does seem to be a fake. If however it turn out to be true, it is likely to be the catalyst for EURUSD to break lower. Headline expected around 8.8%.

Bank of Canada are expected to raise rates 75bps today to 2.25%, there is an outside chance of a full 1% rise but it would be a surprise. BoC also release their monetary policy report which is likely to show inflation forecasts revised higher, along with lower growth forecasts.

I’ve so far managed to avoid buying anything on Amazon Prime day despite being tempted by some good offers for things I really don’t need. Everything I do need isn’t on a deal. Certainly no out of this world savings. Ah, ‘out of this world’ brings me to the James Webb images released by NASA yesterday. They are pretty amazing but you do need to be something of an expert to work out what they are. As I said yesterday, it is more the idea of the distances the light has travelled to be in the images that is most amazing.

- 10.00 EU industrial production

- 12.00 UK NIESR GDP

- 13.30 US CPI

- 15.00 BoC rate announcement

- 16.00 BoC press conference

- 19.00 Feds Beige Book, monthly budget statement

- 00.01 UK RICS house prices

- 02.00 AUS consumer inflation expectation

- 02.30 AUS unemployment

- 05.30 Japan industrial production

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