• Today it was published that U.S. underlying consumer prices increased by the most in nearly 18 months in June. Excluding the volatile food and energy prices, core inflation rose 0.3% m/m in June. However, the market will likely not change expectations that the Federal Reserve will cut interest rates this month.
  • On the other hand, the government of U.S. announced the start of an investigation against France for the tax on Internet giants that this country is considering imposing. The investigation opened by Trump's government is of the same type (Section 301) as the one that led to the tariff war between Washington and Beijing. On the positive side, U.S. economic adviser Larry Kudlow said that he expects China to begin buying U.S. agricultural products soon and stated that trade talks are ongoing.
  • ECB minutes were released. The tone of the minutes reflects the ECB's concern about the outlook for growth and inflation, as well as its determination to do more. In addition, it was pointed out that the Governing Council's communication should place greater emphasis on the symmetry of its medium-term objective.
  • On data front, of German harmonized CPI in June was 1.5% YoY up from 1.3% YoY increase in May. Rate of France harmonized CPI in June was 1.4% YoY equalling last month increase. Additionally, US initial jobless claims declined last week ended July 6th to 209k from previous week’s level of 222k .
  • Across sovereign bond yields, 10Y US treasury yield was up helped by U.S. inflation data. Across European bond markets, core and semi-core sovereign bond yields extended yesterday’s appreciation following some upbeat economic news from France and Italy. Furthermore, peripheral bonds continued benefitting from search for yield strategies. Italy’s risk premium extended its drop (-8bps) after an auction of medium-term Italian government bonds which showed strong demand.
  • FX markets fluctuated in a narrow range. The EUR began the day rising a little with the USD, supported by yesterday Powell's dovish tone, but after U.S. inflation data corrected the increase.
  • Oil remained at levels similar to yesterday's, when it rose sharply due to U.S. inventories falling more than expected and large producers evacuating some oil platforms in the Gulf of Mexico before the arrival of a storm. Moreover, London has accused Iran of blocking the passage of one of its oil tankers in the Strait of Hormuz. In this context, European equity markets showed minor changes. The American stock market slightly increased, being benefited by Powell's words yesterday.

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