European FX Open - GBP/USD holds below 1.3000 pre-UK CPI

The USD starts the day a little softer across the board, as the Fed's Kugler said it would be appropriate to lower borrowing costs 'later this year' if inflation continues to moderate alongside a cooling yet resilient labor market.

Also on the US front, Donald Trump says that, if he wins the US presidency, he'll allow Powell to serve out his term as Fed chair, which runs through May 2026; he wants to bring the corporate tax rate to as low as 15% and he no longer plans to ban TikTok.

CPI will be the morning's focus.

At the top of the hour comes the UK version. In June. the headline is tipped to slow further to 0.1% m/m and 1.9% y/y vs 0.3% and 2.0% the month previous. If it pans out, it would be a softest since April 2021. The core is seen unchanged at 3.5% y/y, while the oft watched services is seen a sticky still 5.6% y/y vs 5.7% last.

Would a topside surprise finally open up a clear 1.3000-plus break, while something softer and more dovish for the BOE could lead to some position paring in this broad outperformer?

Later, we get final EMU CPI for June, with numbers expected at 0.2% m/m and 2.5% y/y, with the core at 2.9% y/y.

Overnight, NZ Q2 CPI missed expectations at 0.4% q/q and 3.3% y/y and Bbg reported after while headline inflation is slowing, the report showed ongoing stickiness in domestic prices such as rents, insurance and local government levies that may concern the RBNZ.

In the second half, US IP for June leads, seen at 0.3% m/m vs a revised softer 0.7% (0.9%). We also get housing starts and building permits out of the States.

The Fed's Barkin and Waller are scheduled speakers ahead and tonight comes the latest Beige Book. The latter could show most Fed districts see slight or modest growth. A range of regional Fed surveys signaled activity remained relatively unchanged through early July though a materially weakening labor market could also be cited.

On the Q2 earnings front, we get the likes of ASML, Investor AB, J&J, US Bancorp, United Airlines and First Horizon.

Also today, BBC News reports the King of the UK will outline the new government's plans at the State Opening of Parliament later. In a speech written by the government, the King is expected to announce around 35 draft laws, with laws on illegal migration, housing and planning, workers' rights, and railway nationalisation are expected.

Meanwhile in Japan, prominent LDP official and potential future PM Kono called on the BOJ to increase interest rates to boost the value of the yen and bring down energy and food costs.

Elsewhere, oil bases for now at Usd 83.30/brl as the API estimated pointed to another decline in US crude stockpiles, countering concerns about a lackluster demand outlook in China.

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free demo of the service today.