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US inflation near historic lows

Political uncertainty in the UK continues to put pressure on Sterling while Trump threatens more tariffs on Chinese imports.

Centtrip: Trump lambasts Fed… again

Federal Reserve Chair Jerome Powell fuelled the argument for an interest rate cut in the US yesterday, by saying inflation levels were nearing historic lows. He also suggested that the Fed had “raised concerns about a more prolonged shortfall in inflation below our 2 per cent target”.

The Fed seems confident that the economy could still grow, but it is important that it adopts an accommodative stance to future monetary policy.

Stronger-than expected US retail sales data softened the chance of a 50-basis-point cut, strengthening the Dollar, particularly against the Pound.

Sterling moved to a 27-month low as both candidates for the UK prime minister, Boris Johnson and Jeremy Hunt, battle to offer a more aggressive stance on a no-deal Brexit than the other. In addition, newly elected European Commission President Ursula von der Leyen suggested that there should be a possible extension to Brexit, which weighed heavily on the Pound, causing it to decline against all major currencies.

In Europe, the German economic research institute ZEW indicated a deterioration in investor sentiment in July, largely driven by the ongoing trade dispute between China and the US. The shift in the mood is compounded by the pressure that a slowdown in growth is putting on the global economy, especially given US President Donald Trump’s threat of further tariffs. Subsequently, the Euro declined by 0.4 per cent against the Dollar.

This morning, the UK will publish the latest Consumer Price Index (CPI) data , followed by the EU final CPI at 10:00 (GMT), Fed member Esther George’s speech at 18:30 and the Beige Book, the Fed’s report providing information on current economic conditions in each district and published eight times a year­, at 19:00.

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