Important Links

USD Weaker after Disappointing Data

18 July 2017FXEurope
Picture

Both US CPI and retail sales for June disappoint Friday, resulting in broad based USD pressure as markets further reduce the probability of a Fed December hike to around 30%.

USD & JPY

  • USD: US June core CPI advances just 0.1% MoM in June, weaker than Citi's and consensus 0.2%. The monthly reading is below consensus for the fourth month in a row even though core YoY remains steady at 1.7%. Fed Funds pricing now attaches around a 30% probability of a December hike even as some in the Fed may see the data as supporting their view that transitory factors have dampened inflation.
  • USD: Headline retail sales also decline 0.2%, weaker than consensus and Citi analysts expectations for 0.1%.

Strategy: USD vulnerable to some further weakness towards the lower end of its trading range

  • Fed speak remains upbeat but increasingly lacks credibility in the markets' eyes and while a good deal of further Fed tightening has been priced out by markets, there still remains scope to do more on this front. Tactically this means a weaker USD, seen heading further lower in its 92.00 – 104.00 range that has held since the beginning if 2016. This implies further weakness against the euro and commodity bloc while Vs Yen, USDJPY is now seen in a 110.50 – 113.50 trading range.

EURO BLOC

Strategy: Both sterling and euro supported against a weaker USD with euro more resilient.

  • USD's tactical weakness could see a further leg higher in EURUSD. The only key event in the euro zone this week is the ECB meeting on Thursday. But with no updated staff forecasts until the September meeting, Citi Research expects unchanged guidance but no pushback from the recently more hawkish Draghi Sintra speech.
  • GBP also continue to strengthen as round two of Brexit negotiations kick off in Brussels.

COMMODITY BLOC

Strategy: AUD & NZD upside momentum likely to falter, CAD more attractive

  • NZD falls after the New Zealand 2Q CPI miss this morning, coming in flat QoQ versus consensus looking for +0.2% and versus +1.0% the prior month.
  • For AUD, further tactical weakness in USD may lift AUD a bit further. However, Citi analysts see iron ore prices resuming their downtrend once again in the months ahead. As a result, caution is warranted and currencies such as EUR and CAD may be relatively more attractive alternatives with CAD in particular seeing the prospect of higher yields longer term amid more balanced positioning.

EMERGING ASIA

Strategy: Short term USD weakness likely to encourage some further gains in Asia EM

  • SGD: June NODX surprises positively, up 8.2% YoY versus consensus at +5.0%YoY with May NODX also revised upwards. T
  • With SGD already trading 1% stronger than the mid band, scope for MAS tightening seems discounted into market pricing though near term USD vulnerability could see USDSGD possibly head a bit lower still towards 1.3600 before momentum likely fades.

Our recent research

Brent Crude Price reaches a 4-year high - Market Insights by Citibank UK

Impact of Higher Oil Prices on Asia

While Citi's Brent crude price forecast remains at $79 per barrel for Q4 2018, recent price trends warrant an assessment of what the risk of sustained higher oil prices mean for Asia.

Find out more

Emerging Markets
Could Bond Yields Continue to Rise post the 7-year high? - Market Insights by Citibank UK

Could Bond Yields Continue to Rise post the 7-year high?

Short-term US rates are expected to rise, while long-term rates remain subjected to both bullish and bearish factors.

Find out more

Equities
Italian 2019 budget deficit target larger than provisionally agreed target between Finance Minister Tria and the EU - Market Insights by Citibank UK

Euro zone worried: Could Rising Italian Pressures Spillover to Europe?

While recognizing the medium-term challenges in Italy, at this stage Citi analysts do not expect significant sustained contagious impact on European assets more broadly.

Find out more

Europe

Take the first steps to your wealth management planning with Citi

Speak to a Relationship Manager
0207 500 1992

Already with Citi? Contact your relationship manager or view product availability on Citi Online

Why choose Citi

A relationship - not just a bank account

A dedicated Relationship Manager giving you access to our internal team of product experts and all our benefits

Access to exclusive Citi products

A range of current and investment products available both on shore and offshore, in the currency of your choice
Multi-currency accounts
Investment products

Global services for a global lifestyle

Our team is here to support you getting started in UK or with International travel and relocation
Moving to and from the UK
Travelling overseas

Offshore investments

We offer a diverse range of banking and investment services, including for those who want access to offshore investments

Find out more

Just moved to the UK?

We can save you time money and hassle. If you are a foreign national in the UK, Citi's International Banking Service can help you manage your money, home and away.

Find out more

Investment products are not insured by any governmental agencies, are not bank deposits, and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates, unless otherwise stated. Investment products are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, investments can go down as well as up.

“Citi analysts” refers to investment professionals within Citi Research (“CR”), Citi Global Markets Inc. (“CGMI”) and voting members of the Citi Global Investment Committee. Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document. The information on this page has been obtained from reports issued by CGMI. Such information is based on sources CGMI believes to be reliable. CGMI, however, does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI’s judgment as of the date of this page and are subject to change without notice. This page is for general information purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or currency. No part of this page may be reproduced in any manner without the written consent of Citibank N.A. Information on this page has been prepared without taking account of the objectives, financial situation, or needs of any particular investor. Any person considering an investment should consider the appropriateness of the investment having regard to their objectives, financial situation, or needs, and should seek independent advice on the suitability or otherwise of a particular investment. Citi Research (CR) is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this information. Investors should consider this information as only a single factor in making their investment decision.

Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, Inc., and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions.