Global markets have shrugged off the historic meeting between President Trump and North Korean dictator Kim.
Treasuries and global equities are mostly flat, and the U.S. dollar is unchanged against the majority of its counterparts. Nevertheless, any steps towards possible denuclearization of the Korean peninsula should be seen as a positive.
Traders seem to be more keen on trading fundamental data. This morning’s release showed that U.S. inflation accelerated in May to the fastest pace in more than six years. CPI rose 0.2% from a month earlier and 2.8% year over year. The annual gain was the biggest since February 2012. The so-called core reading was also up 0.2% in May, matching expectations.
Attention will now shift to tomorrow’s Federal Reserve meeting. Futures show a nearly 100% chance that the Fed will boost rates and this morning’s inflation data reaffirmed the likelihood.
The Euro was mostly unchanged versus the U.S. dollar but remains close to a four-week high. The Euro held recent ranges even after the economic docket showed that German investor confidence slide further this month. The ZEW survey came in at -16.1 v. -8.2 in May.
Thursday’s European Central Bank meeting will be vital to the direction of the EUR/USD over the coming months. We expect an announcement of a plan for the central bank to exit their bond purchase program. Timing and the speed of the reduction will play into the Euro’s price action. Expect EUR/USD to hold tight ranges ahead of Thursday.
The British pound was unable to bounce back from yesterday’s decline even as positive economic data crossed the wire. UK employment rose 146K, beating expectations of a 120K gain. Weekly earnings also rose. However, traders are focused on continued political struggles for Prime Minister May and her Brexit legislation. There are two amendments being voted on this week that could weaken the PM. Overnight, a government minister turned on the PM and said he would vote with the “rebels.”