According to Petr Krpata, chief EMEA FX and IR strategist at ING, the expected solid US activity data today should confirm ING’s view that a 25 basis point Fed rate cut in July (rather than 50bp) should be sufficient as a first insurance move to offset the negative effect of trade wars.

“US retail sales should be stronger, especially when the volatile auto and gasoline components are removed, while industrial production should post a modest increase given the fact that the ISM remains in growth territory. This is consistent with the idea that US personal spending should grow around 4% in the second quarter – an environment which should not warrant material monetary easing. This suggests support for the dollar today, particularly against the low yielders such as EUR and JPY as (a) market expectations of an aggressive Fed easing cycle will be further tamed and (b) the sufficiently high interest rate differential will remain supportive for the dollar.”