Awaiting latest round of US economic data this afternoon

The Day So Far

Today has been a subdued affair so far. There is relative calm in the market place with the positive Greek developments through the week having been priced in for now. The Dax for example has enjoyed 7 consecutive up days as first the Eurozone agreed the outline of a third Greek bailout programme, then Tsipras steered the ‘promised’ reforms through Greek Parliament, then yesterday the Eurozone Finance Minsters agreed a €7bn bridging loan using the EFSF and finally Draghi marginally raised the ELA funding ceiling to the Greek banks. Today we expect the Bundestag to clear the way to allow Merkel to engage in negotiations in the coming weeks/months to finalise the third bailout programme. Whatever your opinion is as to whether a third bailout will ultimately make any difference, it has been enough to calm the waters for now with the Dax managing a 10% bounce off the 8 we await the latest round of US economic data this afternoon. Crude oil has tipped briefly down towards the 7 th July low at $50.58 after some more mild US Dollar strength. T-Notes tested yesterday’s high and for now that caps the upside. EURUSD remains stable just below the 1.09 handle and the S&P 500 sits just 0.3% off its all time high.

The Afternoon View

This afternoon sees US CPI for June, Housing Starts & Building Permits and University of Michigan Consumer Sentiment data releases. Yellen’s semi annual testimony did nothing more than remind us that the Fed stays data dependent when it comes to the timing of rate lift-off. Therefore, the inflation data will have the most market impact this afternoon but only if it is announced away from expectations. Core annualised CPI is expected at 1.8% and anything higher will mean a 11 month high. It is worth mentioning that Core CPI has not been above the Fed’s target of 2% since the beginning of 2012. So any slight movement towards the ‘2’ handle will raise September hike expectations. We also await earnings from General Electric and Honeywell. For this afternoon we have a neutral long strategy for the S&P and a mildly bearish strategy for EURUSD, T-Notes and Crude Oil. Ultimately, we are not expecting much from this afternoon’s markets as we predict that most of this week’s action has already played out. Patience will be key. The final event to be aware of is the potential for news on the cabinet reshuffle in Athens which will give us more clarity on how the events of the last week will reshape the Greek Government.