The dollar has barely budged against the euro since last Wednesday. The NATO summit, the May-Trump meeting and the Putin-Trump summit all failed to pull the markets out of their summer lull, as did the trade tensions between the United States and the various countries affected by new tariffs. US producer prices, published last Wednesday, rose 0.3% in June, above analysts’ expectations of a 0.2% increase. Year on year, this means a rise of 3.4%. Also, the new tariffs levied on certain imported goods could lead the Fed to raise its key rates faster than expected. It has already effected two hikes this year, in March and June. Early in the year, analysts had expected a total of three increases for 2018 but are now leaning towards four. Fed Chairman Jerome Powell confirmed yesterday before the Senate that the Fed intended to stay on course with its monetary policy, gradually raising interest rates despite the uncertainties related to trade disputes. Believing that the risks to the US economy are “roughly balanced” for the time being, and welcoming “stronger” growth, Jerome Powell said that “the best way forward is to keep gradually raising the federal funds rate”. The Chairman’s semiannual testimony today before the House of Representatives. The Beige Book on the economy will also be published today.

For its part, the International Monetary Fund believes that the trade dispute between the United States and its partners could compromise global economic growth in the short term. The IMF has nevertheless maintained, for now, its forecast for 2018, believing the global economy will grow by 3.9% this year. The United States will see the GDP rise by 2.9% – against 2.7% in the last projection – whilst the eurozone, on the other hand, will begin to slow down to 2.2%, against 2.4% in the latest forecasts.

All while we remain entirely in the dark about whether we will see a “soft” or “hard” Brexit. The British Prime Minister narrowly avoided a defeat as Parliament rejected an amendment contrary to her objectives on Brexit. The bill stipulated that, in the absence of a trade agreement with Brussels on the creation of a free trade zone, the government would have the power to stay in the customs union, which is contrary to her views. Mark Carney, for his part, warned the markets that a Brexit without an agreement with the European Union would have very significant consequences and would force the Bank of England to revise its monetary policy.

The Turkish lira was once again under pressure last week, event after President Erdogan promised that interest rates would fall quickly. The Turkish currency flirted with the five-lire-to-the-dollar mark at 4.9743 – a historic low. Mr Erdogan’s statement focusses all the attention and pressure on the central bank’s the next monetary policy meeting to be held on July 24.

Our agenda remains calm as we must wait until next Thursday for the next meeting of a major central bank (in this case, the European Central Bank). The economic calendar is also light until next Friday with the publication of US growth figures. Next week the President of the European Commission Jean-Claude Juncker will meet with President Trump in Washington. If the last summits are any indication, sparks will fly!

Levels

EUR/USD  1.1635 DOW JONES 25’119.89
USD/CHF  1.0025 SMI 8’824.67
EUR/CHF  1.1660 BRUT 67.56
USD/RUB  62.75
XAU/USD  1’225.00