Headline US CPI May Decline For The First Time In A Year

In the UK, parliament is expected to vote shortly on the government's decision to cut funding for its official development assistance from 0.7% of gross national income to 0.5%. Although the figure appears in the Tory Party's manifesto, it was jettisoned by the government to save about GBP4 bln. The international wing of the Tories, which includes former Prime Minister May, is opposed. The vote will be on a statement from the Chancellor of the Exchequer Sunak that the 0.7% target will be restored if the Office for Budget Responsibility confirmed spending is under control and the underlying debt is falling. The net effect would likely limit the international assistance to 0.5% for the next several years.  

The euro remains in the range seen last Friday, roughly $1.1825 to $1.1880. There is an option for around 600 mln euros at $1.1875 that expires today and one for about 660 mln euros that expires tomorrow at $1.1810.ECB President Lagarde's comment that plays up fresh, forward guidance at next week's central bank meeting and a threat to continue limiting bank dividends may have sapped any near-term enthusiasm for the single currency. For the third consecutive session, sterling has found offers waiting when it pokes above $1.3900. It is barely holding above yesterday's low, near $1.3840. Last week's low is another cent down. The UK reports June CPI figures tomorrow, followed by the May/June employment data on Thursday.  

America

The US reports June CPI figures today. It could be the first slippage in the year-over-year headline rate since last May. A 0.5% month-over-month gain could produce a 4.9% year-over-year pace, down from 5.0% in May. The core rate, which excludes food and energy, may tick up to 4.0% from 3.8%. We don't expect it to impact expectations that the Federal Reserve will announce its tapering plans at the end of August (Jackson Hole) or the September FOMC meeting (September 22). Separately, US earnings season kicks off with JP Morgan, and Goldman Sachs reports today.  

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Read more by Marc on his site Marc to Market.

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