Stocks quiet, gold, oil and crypto retrace gains ahead of CPI
Updated Updated Mon, 2025 July 14 09:03
* US inflation seen accelerating in May as tariffs impact prices
* President Trump said to ‘delay’ sanctions threat against Putin
* Bitcoin spikes to another all-time high at $123,231 before retracing
* Q2 earnings expected to post modest growth amid economic crosswinds
FX: USD rose for a third consecutive day as the trade agenda shifted to the EU and Mexico 30% Trump tariff letters due from August 1st. Investors do see these threats as a Washington negotiating tactic to push the other side over the line into a deal. Is there some complacency in this, as alluded to by many market watchers including Jamie Dimon, CEO of JP Morgan Chase, or just more TACO? Trump’s position on Russia might be more of the latter, after he had threatened huge tariffs if no peace deal was reached within 50 days, but late headlines said these had been delayed. US CPI is released today.
EUR printed a narrow range day amid all the big US 30% tariff headlines. US-EU trade negotiations look set to get noisier over the coming weeks, and baseline expectations that the EU secures a 10% tariff rate on most goods could be looking less likely. Higher energy prices are also on the radar and a potential negative for energy-importing Europe, with President Trump’s increased tariffs and sanctions on Russia and its oil partners, though these appear to now be delayed. Previous swing highs at 1.1667 and 1.1631 could be initial support.
GBP sunk for a third day in a row and below support at the 50-day SMA at 1.3495. The late June low sits at 1.3369. Sentiment for the pound remains negative with weekend commentary from BoE Governor Bailey adding to the bearishness after stating that the MPC is prepared to make larger rate reductions if the jobs market shows signs of a pronounced slowdown.
JPY sold off as the major moved higher for a second straight day. Trade tensions remain a key focus amid the latest comments from President Trump and the trade imbalance in autos. Fundamentally, Japan’s core machine orders came in better than expected. The near-term calendar sees national CPI figures released later this week. The data will be an important input for BoJ policymakers as they formulate their policy decision on July 31.
AUD sold off for a second day in a row as markets waited for China data and ahead of aussie jobs numbers on Thursday. CAD outperformed all of its peers apart from the buck. Jobs data was decent even if most gains were part-time. Core CPI released on Wednesday should remain sticky and reinforce the idea that the BoC is sitting on its hands for some time.
US stocks: The S&P 500 printed up 0.14% at 6,269. The Nasdaq settled higher by 0.33% at 22,856. The Dow Jones finished up at 44,460, gaining 0.2%. Sectors were mixed, with Communication and Financial stocks outperforming, while Energy and Materials lagged. Energy’s underperformance tracked the move lower in crude prices after President Trump announced a 100% tariff on Russia, and secondary sanctions on nations that buy Russian oil if a peace deal is not agreed to within 50 days. Q2 earnings season kicks off in earnest this week with Citigroup, Blackrock and JP Morgan Chase reporting today, plus other banking giants later in the week, plus Netflix after the US close on Thursday. Overall S&P 500 earnings growth should be sub-5% y/y, the eighth straight quarter of growth, though potentially the slowest quarterly growth rate since the end of 2023.
Asian stocks: Futures are mixed. APAC equities traded mostly positive more Trump tariff letters and mixed Chinese trade figures. Focus will be on today’s data dump including GDP industrial production and retail sales The ASX200 traded rangebound with softness in tech and financials offset by strong mining and resources performance. The Nikkei 225 initially pulled back but losses were pared on better data. The Shanghai Comp and Hang Seng were in the green on the trade data and possible encouraging trade comments with improved odds of a meeting between Presidents Trump and Xi.
Gold paused its ascent after three straight days of buying. Prices sit above the 50-day SMA at $3,321. A rising dollar and Treasury yields dented bullion’s appeal.
Day Ahead – US CPI
Expectations are for the June headline to rise 0.3% m/m and 2.6% y/y from 0.1% m/m and 2.4% respectively. The core is seen at 0.3% m/m and 2.9% y/y versus the prior 0.1% and 2.8%. Will tariffs finally impact consumer inflation? That is the expectation of most economists, even if they show up more in the July, August and September figures.
Surveys point to rising prices, but seasonal adjustment factors for core CPI have been low in June, and gasoline and food prices have been muted. Housing services inflation also appears to be decelerating and any cooling in labour market conditions through slower hiring demand could put more downward pressure on inflation.
Chart of the Day – USD moving off the lows with bullish momentum
The CPI data has the potential to start removing some of the easing priced into the September FOMC meeting (16bps), which could prove modestly positive for the dollar. There’s around 52bps of rate cuts predicted by money markets for 2025. Most Fed officials have taken a cautious approach on the outlook for rates, given expectations that consumer prices are expected to rise towards the end of the year due to tariff effects, before then falling back. That could likely see officials and Chair Powell stick to their guns, in opposition to the administration and President Trump, just as the heat seems to be increasing again.
Prices may be pushing out of the medium-term bear channel of lower lows and lower highs seen since the start of this year. That comes after the bounce off a long-term upward trendline from a cycle low back in 2011. The 50-day SMA sits at 98.34 with a prior swing low from July 2023 at 99.57. The recent multi-year bottom sits at 96.37.
