US inflation and housing data come into focus this afternoon

Good morning all!

• Falling geopolitical risk provides another boost to risk appetite;

• Focus remains on central banks this week, particularly the Fed, BoE and ECB;

• UK inflation expected to ease off, giving the BoE more time to address slack and poor wage growth;

• US inflation and housing data come into focus this afternoon.

The markets look set for another bright start on Monday as stocks and other risk assets continue to benefit from a significant reduction in geopolitical risk. Negotiations between foreign ministers from Ukraine and Russia in Berlin appear to have made some progress in bringing an end to the crisis, while a 24 hour extension to the truce in Gaza and Israel and the regaining of the Mosul Dam by the Iraqi and Kurdish troops are all helping lift investor sentiment this week.

With geopolitical risk appearing to subside, investors are free to focus on other matters, which this week is likely to be the next moves from the Federal Reserve, the Bank of England and the ECB. Key note speeches at the Jackson Hole symposium from Fed Chairwoman Janet Yellen on Thursday and ECB President Mario Draghi on Friday will be picked apart for any small hints on the direction of monetary policy in the coming months, while the minutes from recent BoE and Fed meetings released on Wednesday will also be heavily analysed for any hidden messages.

These three major central banks are heading in very different directions right now, particularly the ECB when compared to the Fed and BoE. The ECB only recently announced a package of monetary stimulus aimed at stopping the rapid decline in inflation, which has now fallen to 0.4%, and helping to provide more accommodation for eurozone countries many of which are struggling to record any growth whatsoever. The Fed and the BoE on the other hand are dealing with far healthier economies and are instead waiting for the correct time to hike interest rates.

Inflation in these countries is currently below the 2% target set for both central banks allowing them to remain accommodative while addressing the problem of slack and poor wage growth in the economy. The Fed appears more willing to keep rates low for longer at this stage but as we all know, this can change very quickly. Both have inflation numbers for July being released today, although it is worth noting that CPI is not the Fed's preferred measure of inflation so the numbers should be taken with a pinch of salt.

UK inflation, as measured by the preferred CPI reading, is expected to fall slightly to 1.8% in July, with the core number, which excludes volatile items such as food and energy, is expected to fall to 1.9%. The former is the number the BoE focuses on most as this is what their mandate is measured against. Clearly, with the number still below the 2% target, the BoE still has time on its side and as long as we don't see a move above target in the coming months, any rate hike shouldn't come until the first quarter of next year.

US inflation, as measures by the CPI reading, is running very close to target which may soon increase the pressure on the Fed to hike interest rates earlier than it would like. That said, certain members have recently suggested that the Fed would allow inflation to run a little over target in an attempt to tackle the problem of slack in the economy, something I imagine Yellen would be very on board with. Also being released in the US today is building permits and housing starts for July, which given yesterday's reaction to housing data is certainly worth monitoring.

Ahead of the open, the FTSE is seen 15 points higher, the CAC 21 points higher and the DAX 38 points higher.