US inflation the main focus in the day ahead
<p class="text-align-justify" style="text-align: justify;">There's only one game in town for markets today. And no, it isn't France versus Spain sadly. The trading day ahead will center around the US CPI report for June, with inflation data coming back into focus amid the turn of events in the Middle East this past week.</p><p class="text-align-justify" style="text-align: justify;">The US-Iran conflict is back on and that is continuing to turn heads with oil prices surging higher again. WTI crude is clipping the $80 mark with Brent crude rising back up to touch $85 earlier. And that in turn is prompting markets to rethink the Fed outlook again, just weeks after the ceasefire deal was signed.</p><p class="text-align-justify" style="text-align: justify;">As such, the US inflation data coming up later will take on added importance - even if not quite fully reflective of the latest developments yet.</p><p class="text-align-justify" style="text-align: justify;">Headline annual inflation is expected to ease slightly in June to 3.8%, down from 4.2% previously. That comes as the monthly estimate is also expected to show some deflationary signs, driven by a sharp drop in gasoline prices. Of note, energy prices are estimated to fall over 5% month-on-month after the strong surge during the March to May period.</p><p class="text-align-justify" style="text-align: justify;">However, core prices are expected to keep a little more sticky with core annual inflation estimated at 2.8% - marginally down from 2.9% in May.</p><p class="text-align-justify" style="text-align: justify;">The major impact on this one is likely due to the World Cup, which runs through majority of June and well into July. This is usually a quieter time for US sporting events, so to have the biggest one in the world is arguably quite something. That could have some outsized impact on certain CPI categories, especially with food and lodging. The latter in particular is expected to potentially double the inflation rate in May, rising to 0.8% month-on-month.</p><p class="text-align-justify" style="text-align: justify;">Bank of America aggregated credit and debit card data shows that the World Cup
has buoyed retail activity across the 11 US host cities, on average. They note that: "In the three weeks ending 27 June, brick-and-mortar spending at restaurants and bars was up 5.3% y/y in the host cities, vs. 3.8% in the rest of
the US."</p><p class="text-align-justify" style="text-align: justify;">And as a reminder, this data only covers US-based customers. It doesn't cover international tourists and their spending. That means the boost to retail activity from the World
Cup is likely much larger than the BAC card data suggest.</p><p class="text-align-justify" style="text-align: justify;">Anyway, markets are now pricing in ~43% odds of a ratre hike in July with a full 25 bps rate hike now priced for September next. So, those odds are the ones that will matter most in terms of impacting broader market moves in reaction to the inflation data later.</p><p class="text-align-justify" style="text-align: justify;">Here are what analysts are anticipating ahead of the report later (h/t @ MNI):</p><p class="text-align-justify" style="text-align: justify;"></p><p class="text-align-justify" style="text-align: justify;"></p><p></p>
This article was written by fl9bde53b91e184082bbe3aa3acaaf2cb0 at investinglive.com.
This article was sourced from Forexlive. WealthWire India aggregates financial news for informational purposes only. This does not constitute investment advice.
