Market Drivers July 17, 2019
UK CPI prints in-line
EU CPI hotter
Nikkei -0.31% Dax -0.03%
UST 10Y 2.10%
Oil $58/bbl
Gold $1401/oz.

Europe and Asia:
GBP UK CPI Core 0.0% vs. 0.0%
EUR CPI 0.4% vs. 0.3%

North America:
USD Building Permits 8:30
CAD CPI 8:30

It’s been a quiet midweek night of trade in FX with majors holding steady around key levels after selling off against the dollar yesterday.

Cable continued to feel downside pressure as shorts took out the stops around 1.2400 in early morning London dealing, but the pair failed to follow through further and short-covering brought the unit back up above the 1.2400 level by mid-morning trade. Eco data had virtually no impact today as CPI printed in line at 2.0% while PPI reading came in a tad cooler. Overall inflation readings in UK remain steady providing no impetus for BoE to move either way.

For now, the focus in cable remains squarely on politics, but after all the harsh rhetoric from Torries regarding a hard Brexit, the markets appear to have settled down with traders now looking to see the next moves from London and Brussels once the leadership transition in both places is completed.

In Europe the EZ inflation data came in slightly better than forecast at 0.4% vs. 0.3% but here too the data is unlikely to have much impact on policy as inflation in the region remains muted and markets expect the ECB to ease further. EUR/USD continues to hover near the 1.1200 level and unless US yields put in strong gains today is unlikely to fall much below that figure today.

In North America, the eco calendar has a smattering of second-tier data with Canadian CPI which is expected to dip very slightly and US housing data which is not expected to change much from the month prior. However, better than expected consumer spending data and lower rates could set us up for an upside surprise and if Building Permits and Housing Starts do beat their mark, USD/JPY could push towards the key resistance of 108.50 as the day proceeds on hopes that the US economy is catching a second wind as we move into the second half of the year.