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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

China inflation data weighs on APAC currencies

In China, consumer price index was flat in June year-on-year, after a 0.2% gain recorded in May, missing expectations of a 0.2% rise.

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US overview

The US dollar showed modest gains on Monday, but remained lower than where it was on Friday before the release on June non-farm payrolls (NFPs). The US economy added 209,000 jobs last month, missing market expectations for the first time in 15 months. May job creations were also downwardly revised to 306,000.

GBP/USD tested the 14-month high set in June, while USD/JPY fell as low as ¥142.

China

In China, consumer price index (CPI) was flat in June year-on-year (YoY), after a 0.2% gain recorded in May, missing expectations of a 0.2% rise. This was the slowest pace since February 2021. Producer price index fell at the fastest pace since December 2015. The index fell for a ninth straight month, by 5.4% YoY.

This latest data added to the case that the People's Bank of China (PBoC) measures have so far been insufficient. Beijing has set a target for a consumer inflation of about 3% this year. Economists see it more around 1%. Does it mean further cuts from the PBoC should be expected? The market anticipates only another 10-basis point cut this year and believes that support is more likely to come through fiscal measures.

Central banks

There is more to come later this week. A couple of central banks are set to decide on rates, both on Wednesday.

New Zealand is up first. After hiking by 25-basis points at its last meeting and taking the official cash rate (OCR) to its highest in nearly 15 years, the Reserve Bank of New Zealand (RBNZ) is very likely to stay put this month, keeping the OCR at 5.5%. After its last decision the bank said it was seeing borrowing costs peaking at that level.

The situation is different in Canada, where the Bank of Canada (BoC) unexpectedly hiked by 25-basis points in June, for the second time only this year. On Wednesday, the bank is seen to add another quarter of a percentage point to its overnight rate, taking it to 5%.

Concerns about inflation have increased in recent weeks. If headline inflation has been almost constantly falling since June last year, core inflation appears to be stickier. Core CPI has also been falling, but at a slower rate that the main index.

UK retail sales

In the UK, the BRC retail sales monitor is expected to rise by 3.7% in June, the same pace as the previous month, as consumers continue to rein in spending on non-essential goods.

Also on Tuesday, unemployment rate is seen remaining at 3.8%.

On Thursday, a shock could come with monthly GDP. The British economy is expected to have contracted by 0.4% in May month-on-month (MoM). This would take the three-month average to -0.1%. We are nowhere near talking about recession yet, but it is a scenario that economists are keeping in mind, as many see rates rising a further 150 basis points this year.

Corporate news

On the corporate front, there is not much to expect over the next three days. It will all change on Thursday with PepsiCo and Delta Airlines' quarterly reports, followed on Friday by the first set of US banks earnings. JPMorgan Chase, Wells Fargo and Citigroup are due to report.

They will be followed next week by Bank of America, Goldman Sachs and Morgan Stanley.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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