Goldman Sachs is out with its near-term forex outlook
Domestic matters will also be in focus in the UK today, with the announcement of the Spending Review by the Chancellor. The plans are likely to focus on defence, education and the NHS although it is less clear where the savings are likely to come from. The review comes against a weakening economic backdrop as evidenced by the weakening labour market release yesterday.
The latest development implies that the UK economy is perhaps less robust than had been anticipated, although more positively for borrowers, this could put extra pressure on the Bank of England to lower interest rates again.
Having flirted with its record high on several occasions yesterday, the FTSE 100 breezed past the record closing level once more at the open, driven by a rising global tide which is lifting all boats.
Stocks at the sharp end of Asian focus were particular beneficiaries, with the likes of Standard Chartered (LON:STAN), Prudential (LON:PRU) and HSBC (LON:HSBA) posting healthy gains, while the banks more generally resumed their onward march and selective buying among the miners typified a more risk-on approach.
The FTSE 250 posted a marginal gain in opening exchanges to leave it standing ahead by 3.8% so far this year, but the jewel in the UK crown remains the FTSE 100, where a spike of 8.5% is leading the premier index into unchartered positive territory.
Meanwhile, constructive talks between the US and China have put markets on a firmer footing, as investors hope that the worst of the tariff turbulence may have passed.
Details of the framework which has been agreed in principle were patchy and in any event yet to be signed off by both Presidents. Chinese exports of rare earth minerals are likely to have been high on the agenda, although at this stage it has not become apparent what China may have negotiated in return. Even so, the two days of talks represent progress and the hope is now that the more conciliatory momentum can be maintained.
In the meantime, attention will now switch back to the US economy with the latest release of Consumer Price Index numbers later today. The headline number is expected to have risen by 0.2% and the core number which excludes food and energy by 0.3%, leading to an overall acceleration from 2.3% in April to 2.5% in May.
There are two large caveats accompanying the release. First of all, a high reading would likely be market negative as it would strengthen the case for the Federal Reserve to stay put on interest rates on the inflationary side of its dual mandate.
Secondly, it is widely expected that the real tariff impacts will not begin to show until June, which lessens the importance of this particular reading, with the likes of clothing, car and food prices likely to have been most affected.
Increasingly settled investor sentiment has nonetheless reversed the losses of the “Liberation Day” shock earlier in the year, such that each of the main indices are now making steady progress.
In the year to date, the Dow Jones is ahead by 0.8%, the S&P 500 by 2.7%, while the technology-heavy Nasdaq index has also come up on the rails and posted a gain of 2.1% as some technology appetite returns.
Asian markets were also positive on the news emanating from London, especially in China where a stuttering economic recovery was further derailed by the initiation of tariffs earlier in the year. High unemployment, tepid consumer demand and a beleaguered property sector all remain on the to-do list, let alone any ramifications arising from the trade tensions with the US.
There was also some positive news domestically in Japan, where wholesale inflation slowed in May, prompting hopes that the central bank will not move to increase interest rates in its next meeting as had previously been assumed.