US Inflation, Senate Passes the Baton, White House and OPEC

The key event of the current week in general and yesterday in particular is the publication of data on consumer inflation in the United States. YoY growth is still 5.4%. That is, another confirmation that all these talks about the temporality of inflationary processes are so far being broken about reality into small pieces. An interesting fact about yesterday's data. The jump in inflation in June was explained by a sharp rise in prices for used cars (and it was so, since the rise in prices for them in June exceeded 10%). But what is characteristic, in July, the rise in prices for used cars was minimal (about 0%), but inflation remained largely at the same level - 5.4% y / y.

But yesterday, for some reason, everyone decided that a smaller than expected rise in prices excluding food and fuel is a reason to breathe out with relief - there is no inflation problem in the United States. In this regard, the dollar was under downward pressure, gold rose, as well as stock markets.

In our opinion, the markets are clearly mistaken in their reaction yesterday. The ring around the Fed is tightening. On the one hand, strong data on the labor market, on the other hand, inflation of 5.4% indicates one thing - the time has come to tighten monetary policy. Therefore, today we will buy the dollar and sell on the US stock market.

Even though the Senate voted for both the Infrastructure Bill and the Budget Bill. But now the floor is for the House of Representatives, and it is on vacation until at least mid-September (although there is talk of an early exit on August 23). So for the foreseeable future, the issue of the infrastructure plan has been paused.

Another interesting piece of news yesterday, primarily for the oil market, was the information that the White House called on OPEC and its allies to increase production more actively. Let us remind you that India was engaged in this earlier, and China is very dissatisfied with what is happening on the oil market. In general, a critical mass of dissatisfied people has formed.

Today is interesting with data on manufacturing inflation in the US, as well as statistics on GDP and industrial production in the UK.