Dollar Rises By Default, US Inflation Next

Market Drivers July 12, 2018
Trump continues to roil NATO
EZ growth cut, US inflation on tap
Nikkei 1.17%
Dax 0.32%
Oil $71/bbl
Gold $1244/oz.
Bitcoin $6190

Europe and Asia:
No Data

North America:
USD CPI 8:30

It’s been a quiet choppy night of trade in the FX market with the dollar still bid after yesterday’s breakout that saw USDJPY take out the 112.00 figure.

There was no economic data on the calendar but the euro received some bad news when the EC reduced growth estimates for the region to 2.1% from 2.3% earlier. Donald Trump’s constant pressure to renegotiate trade tariffs as well as demands for much larger increases in defense spending for NATO allies is clearly having a negative impact on sentiment in the region which may face slower growth from contraction of trade as well as higher fiscal deficits from increased defense spending.

NATO held an emergency meeting, in response to Mr. Trump’s bellicose demands yesterday as the allies scrambled for a policy solution.

With Europe pressured by Trump, UK pressured by Brexit and commodity dollars pressured by trade war fears, the greenback is rising by default for now. As long as the US economy continues to perform that dynamic should last. To that end, today’s CPI data will be the main economic event of the day with traders looking for a steady 0.2% rise. Inflation has remained steady above the 2% level keeping Fed on hawkish stance, with even such doves as Charles Evans stating that he was more inclined to hike now.

With markets entering the summer doldrums season, price action may be slow as the day progresses, although the constant geopolitical tension caused by Trump may keep markets on edge, FX appears to have settled into narrow ranges for now as traders look for fresh catalysts to trade.