USD: Data remains the biggest driver – ING

The much-anticipated Trump-Putin meeting in Alaska is scheduled for 20.30 BST/21.30 CET, so any headlines may just be able to impact late US trading, but it’s quite possible that the bulk of the market reaction will only materialise on Monday. President Trump has defined this as a “feel-out” meeting and said there will likely be talks with European allies and Ukraine after this summit. This suggests that while we could see some draft plan for a ceasefire tonight, markets may treat it with some caution, ING's FX analyst Francesco Pesole notes.

Oil prices remain the key transmission channel to FX

"Trump has also said there is a “25%” chance nothing will be agreed today. That would be the most bullish scenario for the dollar, which could otherwise still come under a bit more pressure from geopolitical risk unwinding. Oil prices remain the key transmission channel to FX. It is undeniably hard to predict the outcome of today’s summit. But for now, we have not seen a huge impact on the dollar, which we still think will remain primarily driven by the US macro story over geopolitical developments. Yesterday’s sharp rise in PPI (0.9% month-on-month on both headline and core) was a big surprise. PPI has a history of leading CPI, and many components feed into the Fed-preferred core PCE."

"Markets are clinging to the September Federal Reserve cut, perhaps as that is seen as making up for July’s hold now that the jobs picture has changed so dramatically. But the December contract was repriced from -64bp to -57bp, and the two-year swap rate rose 5bp. There is a risk that this hawkish repricing has legs, which might offset the negative impact of any Ukraine ceasefire agreement."

"On the data side, we’ll watch retail sales figures for July today, which are expected to maintain last month’s 0.6% pace, the Empire Manufacturing index and the University of Michigan economic and inflation surveys. Also on the calendar are TIC flows, which have rather spectacularly defied speculation of a run from Treasuries so far."