Macro-News round-up
#MarketNews
📈 In the United Kingdom, price inflation remains at 2%, unchanged from the previous period, despite the estimate being a fall to 1.9%. However, core inflation remains higher and is also increasing. The annualized estimate was 3.4% and rises to 3.5%. The labor market remains tight and wages are rising strongly, suggesting underlying inflation pressures remain elevated. Wage growth is still forecast to be around 6% annually, well above the 2% inflation target, posing upside risks. The BOE had expected a slight fall in services inflation to 5.1%, showing its concerns about stickiness in this sector. Services inflation was unchanged at 5.7%, with increases in hotel prices partly to blame due to concerts and tours in the UK.
🇬🇧 Related Markets:
The bullish movements of the pound continue. The GBPUSD has risen sharply following the inflation data, surpassing 1.30 and pricing in a lower probability of a rate cut.
🇪🇺 In Europe, published inflation rates have been in line with expectations. Annualized June inflation reaches 2.5%, improving and decreasing compared to the 2.6% of the previous period. Core inflation, however, remains at 2.9%, unchanged from the previous period.
🇺🇸 US market. As the market takes the Federal Reserve’s rate cut for granted, investment flows begin to move from safe sectors such as technology to other sectors such as Utilities or real estate. Yesterday we had a curious phenomenon for the second time, Nasdaq 100 fell, while Russell 2000 rose sharply, showing that the divergence that we discussed weeks ago between the technology sector and the rest of the sectors is closing. Large technology firms closed negatively, while Bank América or United Health closed with strong increases after presenting results.
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The side effect of this optimism in the US stock markets is the fall of the dollar. The DXY index has lost the 104 support points and is falling sharply facilitating the bullish movements we have mentioned in GBPUSD, but also lifting EURUSD up to almost 1.0950.
🇺🇸 Bloomberg interviewed Trump at Mar-a-Lago where he discussed his economic plans if re-elected, including tax cuts and tariffs. Trump said he would keep Jerome Powell as Fed Chair but wants the Fed to refrain from any interest rate cuts before the election to avoid giving the economy a boost that could help Biden. He wants to lower corporate taxes to 15%. He indicated he would consider JPMorgan CEO Jamie Dimon for Treasury Secretary if elected in November. On immigration, Trump said restrictions would benefit Black and Hispanic workers by raising wages and protecting jobs. Trump took a skeptical view of defending Taiwan from China and supporting Ukraine, prioritizing the US economy. He made clear he intends to use the full power of the presidency to reshape policies and relationships, both domestic and international, in a second term.
🌎 Geopolitics:
🇺🇸 Donald Trump’s new vice presidential candidate, JD Vance, worries European leaders. At a conference in which he participated in Munich, he openly said that he believed that the best solution to the Ukrainian conflict was to reestablish the basis for negotiation and end military aid. The European political class that has committed itself to the war fears that Trump’s victory will turn the script unexpectedly. Some European diplomats urge caution, pointing out that the elections are not over. In an interview that went viral yesterday, Victoria Nuland, who played a decisive role in the outcome of the 2014 uprisings in Ukraine, said the following: “I don’t think Donald Trump is going to become President. If that’s what Putin’s betting on, he’s going to get a nasty surprise, I think”
