MNI US OPEN - BoE Aug Cut Still Priced, Despite Higher CPI

EXECUTIVE SUMMARY:

• MARKETS STILL ON COURSE FOR AUGUST BOE RATE CUT DESPITE HIGHER UK CPI
• FRENCH OPPOSITION CRITIQUES BUDGET PROPOSALS AS GOVT POSITIONS TO AVOID A VOTE
• FED'S LOGAN SAYS COULD BE FALL BEFORE WE GET TARIFF CLARITY
• US PPI, INDUSTRIAL PRODUCTION, FED'S BEIGE BOOK UP NEXT 

Figure 1: GBP/USD maintains break of uptrendline support, despite higher UK CPI

Source: MNI/Bloomberg Finance L.P.

NEWS

FED (MNI): Fed's Logan - Could Be Fall Before Tariff Clarity
Dallas Fed President Lorie Logan on Tuesday said it could be the fall before it is clear how much impact rising import tariffs have on inflation. "My expectation is we'll be looking at the data over the course of the summer and into the fall before we really have a good read on how they're affecting prices overall," she said about the impacts of the Trump administration's tariff policies.

US (WSJ): Trump Executive Order to Help Open Up 401(k)s to Private Markets
President Trump is expected to sign an executive order in the coming days designed to help make private-market investments more available to U.S. retirement plans, according to people familiar with the matter. The order would instruct the Labor Department and the Securities and Exchange Commission to provide guidance to employers and plan administrators on including investments like private assets in 401(k) plans, the people said.

US (WaPo): Vance casts tie-breaking vote as Senate advances bill to slash $9 billion from budget
The legislation to claw back funding for foreign aid, NPR and PBS is a Trump administration priority, but some Senate Republicans have raised concerns about the cuts.

UKRAINE (Reuters): Patriot Missile Systems Meeting Could Take Place on Weds Next Week
A meeting of patriot missile system owner nations and Ukraine donors that are aiming to find additional patriot air defence batteries for Kyiv could take place on Wednesday next week, according to a source close to the talks. The meeting is to be chaired by NATO's top military commander. 

FRANCE (MNI): Opposition Criticise Budget After PM Outlines 2026 Proposals:
Opposition politicians have been lining up to criticise the budget proposals announced by PM Francois Bayrou on 15 July. There is a strong likelihood that, given the gov'ts minority status, Bayrou will have to push the budget through using Article 49.3 of the French constitution in order to avoid a vote.

EU (MNI): Commission To Unveil Multi-Trillion Euro Long-Term Budget Proposal ~17:00CET
At around 17:00CET (11:00ET, 16:00BST), European Commission President Ursula von der Leyen and Budget Commissioner Piotr Serafin are set to hold a press conference to unveil Commission proposals for the next Multiannual Financial Framework (MFF). The MFF is the long-term EU budget spanning 2028 to 2034. Politico reported late on 15 July that the central budget figure being targeted by the Commission is EUR1.717 trillion, which "would mean total spending would rise to 1.23 percent of gross national income for the seven years from 2028, compared with around 1.1 percent over the current period."

CHINA (MNI): China To Open Consumption Market - He Lifeng
China is launching targeted campaigns to boost consumption and create broader markets for global enterprises, while leading developing countries to participate in global industrial and supply chains, said vice premier He Lifeng, at the China International Supply Chain Expo in Beijing on Wednesday.

• UK JUN CORE CPI +0.4% M/M, +3.7% Y/Y
• UK JUN RPI +0.4% M/M, +4.4% Y/Y
• UK JUN SERVICES CPI +0.6% M/M, +4.7% Y/Y

Air fares, clothing, media drivers with marginal broad services

• Looking through, other than the air fares there's no one thing that is driving the beat for services. Core goods are likely driven by clothing and recording media. There were just a lot of categories that added 0.01ppt here and there - so it looks a relatively broad-based marginal increase in quite a few services categories here.
• This does put headline CPI 0.22ppt above the BOE's May MPR forecast with services 0.15ppt above forecast, core goods 0.07ppt below forecast, food 1.02ppt above forecast and energy 0.35ppt below forecast.
• Overall, we think the BOE will largely describe inflation in the August MPR as broadly in line with their forecast, albeit with food price inflation higher than expected.

SWEDEN (MNI): June PES Data Indicates Labour Market Conditions Are Still Subdued
The Swedish unemployment claims rate ticked up a tenth to 7.1% on a rounded basis in June, after seven consecutive months at 7.0%. Labour demand metrics within the report improved slightly relative to May, but the broader signal is still that the labour market is subdued. This will likely contribute to one more Riksbank cut this year, with analysts generally leaning towards a move in September. However, it is still too early to fully rule out a cut in August.

EGBS: Bund Futures Off Session Lows But Bearish Theme Still Dominant

Bund futures are off session lows following a downtick in Brent crude futures, but remain -6 ticks at 129.40. A bearish technical theme remains intact, with initial support the July 14 low at 129.08, clearance of which would expose the key support at 128.97 (May 14 low).

• German yields are off earlier highs, now up to 0.5bps lower across the curve. Germany will sell E1.0bln of the 1.25% Aug-48 Bund alongside E1.5bln of the 2.90% Aug-56 Bund at 1030BST.
• In France, opposition politicians have been lining up to criticise the budget proposals announced by PM Francois Bayrou on 15 July. There is a strong likelihood that, given the gov'ts minority status, Bayrou will have to push the budget through using Article 49.3 of the French constitution in order to avoid a vote.
• The 10-year OAT/Bund spread remains fairly insulated though, currently 0.5bps tighter at 69bps.
• Broader EGB spreads to Bunds are also little changed, with European equity futures off earlier lows.
• The Eurozone May trade surplus was larger than expected at E16.2bln (vs E14.0bln prior).
• Broader global focus will be on the US PPI report at 1330BST following yesterday’s CPI reading, which started to show some tariff impact in core goods categories.

GILTS: Off Lows As Support Holds & Oil Softens, 50bp BoE Cuts Priced Through Dec

Gilts trade away from lows after support in futures held and with oil prices edging lower. Still, yields are higher across the curve in the wake of this morning’s firmer-than-expected CPI reading.

• Gilt futures last -16 at 91.41 vs. session lows at 91.17. June 2 low (91.16) provides key support.
• Yields 1.5-2.5bp higher, 5s under the most pressure.
• 2s remain rangebound.
• 10s briefly pierced the June 9 high (4.673%).
• STIRs price around ~50bp of cuts through year-end, with over 80% odds of the next cut priced through August. Market priced ~58bp of cuts through year-end at one stage on Monday.
• A reminder that while the UK CPI data was firmer-than-expected it wasn’t too out of line vs. BoE expectations.
• That means that the market remains comfortable with discounting a once per quarter rate cutting cycle through year end, given the softening labour market and still stagnant economic growth.
• What’s more, BoE Governor Bailey’s weekend comments were dovish and centred on the labour market, which increases the importance of tomorrow’s labour market data release.
• The 4.50% Sep-34 gilt PGT saw solid enough demand and pricing metrics but wasn’t quite as well-received as yesterday’s PGT.
• Little of note on the UK calendar for the remainder of the day, leaving focus on U.S. PPI data and any ongoing reaction to the domestic CPI print.

FOREX: Greenback Consolidating Tuesday Advance, GBP Contained Post CPI

• G10 currency ranges have been very contained early Wednesday, allowing the US dollar to consolidate the prior day’s broad-based advance following the release of US inflation figures. The recent USD index recovery has now extended to around 2.3% from cycle lows printed on July 01. The rally marks the cleanest evidence yet of a material break of the downtrend posted off the February high, bolstered by a clean break above the 20-day EMA.
• USDJPY moderately extended its significant upswing overnight, printing at the highest level since April 03 at 149.18. Bullish momentum was underpinned by the rising US yields and breaks above the June and May highs likely exacerbated the move. The May high around 148.65 has provided support this morning, keeping a short-term bullish theme prominent.
• the next focus will be on 149.38, the 50.0% retracement of the Jan 10 - Apr 22 bear leg, and 150.49, the Apr 2 high.
• Despite headline and core CPI in the UK surprising to the upside, we think the BOE will largely describe inflation in the August MPR as broadly in line with their forecast. This explains the very limited reaction for GBP this morning, as markets assess the upcoming labour market data on Thursday and bearish technical developments for the pound.
• GBPUSD breached important trendline support below 1.3430 yesterday, drawn from the Jan 13 low. A clear break of the trendline strengthens a bearish threat and exposes 1.3335, the May 20 low.
• The data focus later today will be on US PPI, industrial production and the Fed’s beige book. There are also various FOMC speakers expected.

EQUITIES: Futures Extend Tuesday Weakness

S&P E-Minis are trading in a range, closer to their recent highs. The trend condition remains bullish. Recent activity has resulted in a break of resistance at 6128.75, the Jun 11 high. The breach confirmed a resumption of the uptrend. A bull cycle in Eurostoxx 50 futures remains in play and the latest pullback still appears corrective. Recent gains have exposed key resistance and the bull trigger at 5486.00, the May 20 high.

• Japan's NIKKEI closed lower by 14.62 pts or -0.04% at 39663.4 and the TOPIX ended 5.91 pts lower or -0.21% at 2819.4.
• Elsewhere, in China the SHANGHAI closed lower by 1.222 pts or -0.03% at 3503.777 and the HANG SENG ended 61.07 pts lower or -0.25% at 24529.05.
• Across Europe, Germany's DAX trades higher by 15.18 pts or +0.06% at 24074.72, FTSE 100 higher by 11.26 pts or +0.13% at 8949.56, CAC 40 down 10.57 pts or -0.14% at 7755.19 and Euro Stoxx 50 down 19.75 pts or -0.37% at 5334.6.
• Dow Jones mini down 39 pts or -0.09% at 44208, S&P 500 mini down 8.75 pts or -0.14% at 6275.25, NASDAQ mini down 65 pts or -0.28% at 22991.

COMMODITIES: Gold Finds Support at 50-dma

A bull cycle in Gold that started Jun 30, remains intact and the yellow metal is holding on to the bulk of its recent gains. Note that medium-term trend conditions are bullish - moving average studies are in a bull-mode position highlighting a dominant uptrend. WTI futures maintain a bearish tone. The sharp reversal from the Jun 23 high continues to highlight scope for an extension lower and this suggests that recent gains have been corrective.

• WTI Crude up $0.01 or +0.02% at $66.46
• Natural Gas up $0.01 or +0.37% at $3.537
• Gold spot up $16 or +0.48% at $3339.9
• Copper down $5.35 or -0.96% at $552.8
• Silver up $0.29 or +0.77% at $37.9798
• Platinum up $10.54 or +0.77% at $1381.05

Date	GMT/Local	Impact	Country	Event
16/07/2025	0900/1100	*	EU	Trade Balance
16/07/2025	1100/0700	**	US	MBA Weekly Applications Index
16/07/2025	1215/0815	**	CA	CMHC Housing Starts
16/07/2025	1230/0830	***	US	PPI
16/07/2025	1230/0830	***	US	PPI
16/07/2025	1315/0915	***	US	Industrial Production
16/07/2025	1315/0915		US	Cleveland Fed's Beth Hammack
16/07/2025	1400/1000		US	Fed Governor Michael Barr
16/07/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
16/07/2025	1800/1400		US	Fed Beige Book
16/07/2025	2230/1830		US	New York Fed's John Williams
17/07/2025	0130/1130	***	AU	Labor Force Survey
17/07/2025	0600/0700	***	GB	Labour Market Survey
17/07/2025	0900/1100	***	EU	HICP (f)
17/07/2025	0900/1000	**	GB	Gilt Outright Auction Result
17/07/2025	-		EU	ECB Cipollone At G20 Meeting
17/07/2025	1230/0830	***	US	Jobless Claims
17/07/2025	1230/0830	**	US	WASDE Weekly Import/Export
17/07/2025	1230/0830	*	CA	International Canadian Transaction in Securities
17/07/2025	1230/0830	***	US	Retail Sales
17/07/2025	1230/0830	**	US	Import/Export Price Index
17/07/2025	1230/0830	**	US	Philadelphia Fed Manufacturing Index
17/07/2025	1230/0830	***	US	Retail Sales
17/07/2025	1400/1000	*	US	Business Inventories
17/07/2025	1400/1000	**	US	NAHB Home Builder Index
17/07/2025	1400/1000	*	US	Business Inventories
17/07/2025	1400/1000		US	Fed Governor Adriana Kugler
17/07/2025	1430/1030	**	US	Natural Gas Stocks
17/07/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
17/07/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
17/07/2025	1645/1245		US	San Francisco Fed's Mary Daly
17/07/2025	1730/1330		US	Fed Governor Lisa Cook
17/07/2025	2000/1600	**	US	TICS
17/07/2025	2230/1830		US	Fed Governor Christopher Waller