MNI BRIEF: Treasury's Yellen: Inflation Moving To Fed's Target

MNI BRIEF: China State Planner To Increase Trade-in Support

MNI China Daily Summary: Thursday, July 25

MNI: PBOC Conducts CNY200 Bln via MLF Thurs; Rate Cut

MNI: PBOC Sets Yuan Parity Lower At 7.1321 Thurs; -1.92% Y/Y

CHINA PBOC CONDUCTS CNY235.1 BILLION VIA 7-DAY REVERSE REPOS THURS

EZ/UK Bond Supply Calendar: BoE Short APF Operation on Monday

US Treasury Auction Calendar

EZ/UK Bond Supply Calendar: BoE Short APF Operation on Monday

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

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What to watch

OUTLOOK
  • The main event of the day will be US CPI. Core CPI inflation is seen nudging up to 0.3% M/M in December after surprising lower with 0.20% last month as the three main areas of core - shelter, services ex shelter and goods - all moderated. Attention is likely most firmly on core services excluding shelter with its continued FOMC focus, and then any further goods deflation.
  • We see high sensitivity to surprises in either direction with around 32bp currently priced for the Feb 1 FOMC meeting, especially if in stickier, less idiosyncratic categories. The historically low u/e rate gives hawks something to build upon if an upside surprise, but might need to be followed by strong composition-adjusted wage growth in measures released later this month to lock in another 50bp hike, whilst a downside surprise could further cement a 25bp hike with a resulting relief rally. For our full US CPI preview click here.
  • The US CPI print is likely to have a global impact, with rate expectations in the UK and Eurozone also likely to be pulled around.
  • After the CPI print we are due to hear from three Fed speakers today: Harker, Bullard and Barkin.
  • We are also due to hear from the BOE's Mann - the sole hawkish dissenter at December's MPC meeting who continued to vote for a 75bp hike.
  • Outside of this, there is another relatively heavy morning for EGB supply with Spanish and Italian auctions due (albeit supply will be much smaller than Tuesday's bumper day).
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