MNI US OPEN: Euro On Cusp Of Dollar Parity

EXECUTIVE SUMMARY:

• GERMANY PREPARED FOR ALL GAS SUPPLY SCENARIOS: ECON MINISTER HABECK
• ZEW SURVEY SEES GERMAN ECONOMIC CONFIDENCE COLLAPSE
• JAPAN SUZUKI, U.S. YELLEN TO CLOSELY COOPERATE ON FX
• NAGEL URGES ECB ACTION ON RISK OF HIGHER MEDIUM-TERM INFLATION

Fig. 1: EURUSD On The Cusp Of Parity

Source: BBG, MNI

NEWS:

GERMANY / EUROPE ENERGY: Wires carrying comments from German Economy Minister and Vice-Chancellor Robert Habeck claiming that 'Germany is prepared for all gas supply scenarios'.

• There has been escalating concern in Germany that following a 40% reduction in gas supplies via the Nord Stream pipeline recently, that Russia could eventually fully halt supplies during the height of winter, resulting in a major energy crisis.
• Nord Stream is at present shut for a minimum of 10 days to allow for routine maintenance. The pipeline is also waiting on the shipping of a turbine from Canada, where it was being repaired. Canada could not ship the part directly to Russia due to sanctions, so is shipping it to Germany before it is passed on.

US / JAPAN (RTRS): U.S. Treasury Secretary Janet Yellen on Tuesday acknowledged the Japanese yen's substantial depreciation in recent weeks, but said the U.S. view remained that currency intervention was warranted only in "rare and exceptional circumstances."Yellen, speaking after separate meetings with Japanese Finance Minister Shunichi Suzuki and Bank of Japan Governor Haruhiko Kuroda, said they had reviewed the yen's recent depreciation, but did not discuss currency intervention or related policy. She told reporters that the United States believed that countries such as Japan, the United States and other members of the Group of Seven rich nations should have market-determined exchange rates, and "only in rare and exceptional circumstances is intervention warranted."

US / JAPAN: Japan’s Finance Minister Shunichi Suzuki told reporters on Tuesday that he and U.S. Treasury Secretary Janet Yellen agreed to closely contact with movements of foreign exchange rates and they also agreed to closely cooperate with them in an appropriate manner. Suzuki also said that they agreed with the view that high volatility of forex rates caused by the Russian’s invasion of Ukraine has had an adverse impact on the stability of forex rates. He told Yellen that Japanese authorities keep close eye on forex moves with a sense of urgency, and later issued a joint statement. Earlier in the day, Yellen appeared to have met with Bank of Japan Governor Haruhiko Kuroda at the BOJ headquarters in Tokyo to exchange view on global economic and financial conditions. A BOJ spokesman did not confirm and deny the meeting.

ECB (BBG): The European Central Bank must act to prevent faster-than-expected inflation from becoming increasingly self-sustained, according to Governing Council member Joachim Nagel. Euro-area price growth hit a fresh record of 8.6% in June -- above what most economists had expected and more than four times the 2% goal -- with Nagel warning that “this also increases the risk that inflation will remain higher in the medium term.” “As the Governing Council, we are measured by our words and, above all, by our actions,” he told an event Tuesday in Munich. “We need to bring inflation back to our target in the medium term.”

US / OPEC: Joe Biden will push for higher crude output levels from OPEC nations when he meets Gulf Leaders in Saudi Arabia this week according to White House national security adviser Jake Sullivan.

• "We will convey our general view…that we believe that there needs to be adequate supply in the global market to protect the global economy and to protect the American consumer at the pump," Sullivan said.
• Biden heads for his first Middle East trip as president today, with stops in Israel, the West Bank and Saudi Arabia on his agenda.

UK POLITICS: The Conservative party leadership contest officially begins today, with nominations to get on the ballot opening and closing. Last night, following elections to the executive of the 1922 Committee of backbench Conservative MPs, the body decided on the official rules for the party's leadership campaign. Nominations are open today, closing at 1800BST. Meanwhile, Labour is expected to table a vote of no confidence in the government today, with a vote likely to be held tomorrow. There is very little chance of this passing given that a Conservative leadership contest is already underway and the process is as expediated as it can be given the timing of the summer recess. It is more political theatre with no real impact. The other UK story to look out for today (other than if there are any other names thrown into the hat for the leadership contest) are more details on Rishi Sunak's leadership campaign.

UK: The UK will see limited near-term economic impact from the resignation of Prime Minister Boris Johnson, but uncertainties are growing, ratings agency DBRS Morningstar said Tuesday. An incoming new leader of the Conservative Party -- and therefore de facto PM -- could change the overall direction of fiscal and monetary policy, with potential implications for the outlook, but overall, 'in the longer term, (the government's) fiscal policy will follow a broadly prudent path," according to Adriana Alvarado, Senior Vice President in the Global Sovereign Ratings Group.

UKRAINE - RUSSIA: Interfax reports that the next round of consultations between Russian and Turkish militaries on Ukrainian grain exports will take place in Istanbul tomorrow. Ukraine and the United Nations are to join Russia and Turkey in the consultations concerning a grain export corridor.

DATA:

LOOK AHEAD:

Date	GMT/Local	Impact	Flag	Country	Event
12/07/2022	1000/0600	**		US	NFIB Small Business Optimism Index
12/07/2022	-			EU	ECB de Guindos at ECOFIN Meeting
12/07/2022	1255/0855	**		US	Redbook Retail Sales Index
12/07/2022	1400/1000	**		US	IBD/TIPP Optimism Index
12/07/2022	1530/1130	**		US	US Treasury Auction Result for 52 Week Bill
12/07/2022	1600/1200	***		US	USDA Crop Estimates - WASDE
12/07/2022	1630/1230			US	Richmond Fed's Tom Barkin
12/07/2022	1700/1300	**		US	US Note 10 Year Treasury Auction Result
13/07/2022	0600/0700	***		UK	Index of Production
13/07/2022	0600/0700	**		UK	Output in the Construction Industry
13/07/2022	0600/0700	**		UK	Trade Balance
13/07/2022	0600/0700	**		UK	Index of Services
13/07/2022	0600/0700	**		UK	UK Monthly GDP
13/07/2022	0600/0800	***		DE	HICP (f)
13/07/2022	0645/0845	***		FR	HICP (f)
13/07/2022	0900/1100	**		EU	industrial production
13/07/2022	1100/0700	**		US	MBA Weekly Applications Index
13/07/2022	-	***		CN	Trade
13/07/2022	1230/0830	***		US	CPI
13/07/2022	1400/1000	***		CA	Bank of Canada Policy Decision
13/07/2022	1400/1000			CA	BOC Monetary Policy Report
13/07/2022	1430/1030	**		US	DOE weekly crude oil stocks
13/07/2022	1430/1030	**		US	DOE weekly crude oil stocks
13/07/2022	1500/1100			CA	BOC press conference
13/07/2022	1700/1300	***		US	US Treasury Auction Result for 30 Year Bond
13/07/2022	1800/1400	**		US	Treasury Budget
13/07/2022	1800/1400			US	Federal Reserve Beige Book