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Macro Roundup (Jul 14)
Jul 14,2021 09:00CST
Data Analysis
The US dollar climbed to a 5-day high against a basket of currencies on Tuesday after data showed US inflation data for June coming in hotter than expected, raising the prospect that inflationary concerns are set to linger.

SHANGHAI, Jul 14 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The US dollar climbed to a 5-day high against a basket of currencies on Tuesday after data showed US inflation data for June coming in hotter than expected, raising the prospect that inflationary concerns are set to linger.

US consumer prices rose by the most in 13 years in June amid supply constraints and a continued rebound in the costs of travel-related services from pandemic-depressed levels as the economic recovery gathered momentum.

″(This was) clearly an upside surprise. It will make (Federal Reserve Chairman Jerome) Powell's testimony on Capitol Hill tomorrow a much trickier exercise than it would've otherwise been given that it will put some additional pressure on the ‘transitory’ narrative,” said Michael Brown, senior analyst at payments firm Caxton in London.

“FX reaction is as one would expect given an upside surprise, with the dollar rallying across the board in line with the sharp rise in Treasury yields,” said Brown.

Traders are looking forward to Powell testifying before Congress on Wednesday and Thursday for any signals on the timing of potential U.S. tapering.

Powell has repeatedly stated that higher inflation will be transitory, noting that he expected supply chains to normalize and adapt. Treasury Secretary Janet Yellen shares that view.

The dollar index, which measures the greenback against a basket of six currencies, was 0.59% higher at 92.762, its highest since July 8. The index is just shy of the three-month high of 92.844 touched last week.

On Wall Street, US stock index futures were flat in overnight trading on Tuesday, after the major averages finished in the red, weighed down by inflation fears.

Futures contracts tied to the Dow Jones Industrial Average rose 9 points. S&P 500 and Nasdaq 100 futures were also slightly higher.

The Dow closed the regular trading session down 107 points, or 0.3%. The decline came a day after the Dow closed at a record. The S&P and Nasdaq Composite hit all-time highs on Tuesday before giving back those gains and ultimately closing lower. The S&P 500 dipped 0.35%, while the Nasdaq Composite shed 0.38%, each posting their first negative session in three.

The decline came after the Labor Department said inflation last month advanced at its fastest pace in nearly 13 years. The consumer price index jumped 5.4% from a year earlier, which was above expectations of a 5% increase, according to economists surveyed by Dow Jones. However, since a significant portion of the overall increase came from a jump in used car prices, some were quick to say the inflation will likely be transitory.

Amid a down day on Wall Street, the S&P 500 tech sector bucked the negative trend and closed at a fresh all-time high. The 10 other S&P sectors dipped, with real estate leading the losses.

Oil rose on Tuesday, recovering from the previous day’s drop, as expectations of further declines in US crude inventories outweighed fears that spreading Covid-19 variants could derail a global economic recovery.

Brent crude for September climbed 8 cents, or 0.1%, to $75.24 per barrel, after losing 0.5% on Monday. US West Texas Intermediate crude for August was at $73.93 a barrel, down 17 cents, or 0.2%, having fallen 0.6% the previous day.

“Optimism about tight supply and declining U.S. crude stockpiles lent support,” said Toshitaka Tazawa, an analyst at commodities broker Fujitomi Co, adding that bullish global equities also helped boost risk appetite among investors.

“Still, growing concerns over a spike in Covid-19 infection cases worldwide and uncertainty over production plans by OPEC+ will likely limit gains,” he added.

US crude inventories were expected to fall for an eighth consecutive week, while gasoline stocks also declined, a preliminary Reuters poll showed on Monday.

Gold was little changed on Tuesday as a firmer dollar offset support from bets that the Federal Reserve was unlikely to respond with immediate monetary tightening after US consumer prices rose by the most in 13 years last month.

Spot gold was steady at $1,806.64 per ounce by 2:11 p.m. ET. US gold futures settled up 0.2% at $1,809.90.

The closely-watched US consumer price index (CPI) increased 0.9% last month, compared with a forecast for a 0.5% uptick by economists polled by Reuters.

But analysts said the data was unlikely to trigger a swift monetary policy tightening response from the Fed, providing some support to gold.

“It's going to take a string of these hotter numbers on the inflation readings to move the needle for the Fed. One month's reading is not going to do it,” said Jim Wyckoff, senior analyst with Kitco Metals, adding that the Fed would also take employment and growth readings into account.

Still, markets will now eye Fed Chairman Jerome Powell's testimony before Congress on Wednesday and Thursday for any hints on the central bank's monetary policy outlook.

US PPI annual rate in June and EIA crude oil inventory change in the US as of July 9 will be released today.


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