Midday Brief – Sideways Trading

The European trading session was fairly slow as the U.S. CPI released kept traders from placing full bets on the market, with the common theme of US dollar weakness and stock strength prevailing.

Markets are mildly positive that the U.S. CPI print is going to come in close to 3% or even slightly below, although the real test would be the drop if any in Core CPI.

On the data front Spain June final CPI came in at +1.9% vs +1.9% y/y. These are initial estimates and while the headline figures are a welcome development.

The core annual inflation is only seen easing slightly from 6.1% in May to 5.9% in June. So this sets up a common theme and problem for most central banks as core remains sticks.

BOE Governor Bailey comment after the recent Financial Report release and he noted that the UK economy and the financial system have been resilient so far.

Remarks by BOE governor, Andrew Bailey came after the financial stability report, and they reaffirmed that the central will remain vigilant as impact of higher rates feed through.

Other key points and quotes from Bailey included that “Tighter bank lending standards reflect appropriate risk judgement” and “Strong UK labour market reduces stress on households from higher rates.”

The Financial report also highlighted that Global economic outlook is highly uncertain, risk environment is challenging.

The Bank of England commented that “Higher interest payments on loans mean borrowers may struggle with repayments.” AND That “increases the risks faced by banks, But UK banks are resilient and are strong enough to support their customers.”