UKCPI as expected, US Retail Sales Next

Markets are yet again trading within a narrow range, near their London open levels. UK consumer inflation data came as expected. Market turns to US Retail Sales and PPI.

GBP is little changed after May CPI came out in line with expectations at 0.2% m/m and 4.5% y/y. It may be a bit premature but inflation seems to be leveling off and over the past four months prices have been stable. Monthly core CPI came out unchanged and annual core CPI was slightly lower at 3.3% vs. previous 3.7%.

The deterioration of US data is set to continue at 8:30 ET when US Advanced Retail Sales are due. They are expected to contract by 0.3% from previous growth of 0.5%. The last time Retail Sales experienced a monthly contraction was in July 2010. Core Retail Sales are expected to drop to 0.3% from previous 0.6%. Retail Sales are often used to gauge the health of the consumers. Because the US economy is reliant on a consumer spending, any contraction implies worsening data down the road.

Annual May PPI, also due at 8:30 am ET is expected to drop sharply to 0.1% from previous 0.8%. If producer prices come as expected it would be the smallest increase since August 2010.

Greek, Portuguese and Irish 10 year government bonds yields have all hit their Euro lifetime highs today. Underlying worries are ongoing and a complete risk off sentiment is only one step away. Should equities fall, USD and JPY would benefit.