High inflation continues to fuel US dollar strength

After an unparalleled period of US dollar strength and risk-off moods, markets seem to have taken a breather this week.

Since the end of the second quarter, the US Dollar Index has surged nearly 3 per cent and is currently consolidating above 107 levels.

The underlying issues fuelling the recent dollar rally have remained unchanged and this week’s moves can be seen as a short-term relief rally.

The theme of hotter-than-expected inflation continues after last week’s US consumer price index — the critical measure of US inflationary conditions — came in higher than expected at a 40-year high of 9.1 per cent versus a previous reading of 8.6 per cent.

This sparked fresh dollar buying in anticipation of a more hawkish US Federal Reserve, which will reconvene on July 27 (10pm UAE time) to decide its next interest rate rise in an effort to rein in rising inflation.

Markets were anticipating a 1 per cent increase at the Fed meeting.

But, after comments by Atlanta Fed president Raphael Bostic and St. Louis president James Bullard that interest rates moving “too dramatically could undermine the positive trends still seen in the economy and add to the already large amounts of uncertainty”, markets are now factoring in a 75 basis point increase.

This move would follow the Fed's increase of 75 basis points last month.

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Bear market blues: why investors should remain optimistic

Economic data in the US is showing some signs of improving — despite inflation that is near to peaking.

US retail sales released last Friday showed an increase of 1 per cent month on month during June, which further pointed to signs that the current rate rise squeeze and increasing consumer prices are not as damaging to retail spending as initially thought.

This led to major US bourses clawing back some of the earlier weeks’ losses to close Friday on a positive note.

Meanwhile, earnings season is expected to continue this week.

After a mixed run from banking heavyweights, Tesla, Johnson & Johnson, ASML and Netflix are all set to announce earnings this week.

Keep an eye on the earnings per share announcements and how the revenue of these mega-cap companies fared during the second quarter.

Any missed expectations on the downside regarding revenue could further rile investor confidence in the short term.

Demonstration in Brussels against cost of living - in pictures

A banner is unfurled as people in Brussels protest over the rising cost of living, with the message 'Life is expensive, we need better wages'. Reuters

A demonstrator wears a hard hat depicting European Council President Charles Michel at the demonstration in Brussels. Reuters

Unions said they expected tens of thousands of people to attend Monday's protest in the Belgian capital. Reuters

A protester holds a 'Belgium out of Nato' sign on a march with trade union members in Brussels. AP

Parts of Brussels were brought to a standstill by the rally, although train services were running, partly to allow protesters to converge on the city. AP

A day of strikes on Monday across Belgium over the cost of living forced Brussels Airport to ground all departing flights and many bus services were also cancelled. AP

Protesters are disgruntled because inflation in Belgium hit 9 per cent this month, largely because Russia's invasion of Ukraine has affected grain supply and caused the cost of energy to surge. AP

The country's prime minister sought to reassure the Belgian public. Reuters

Alexander De Croo said Belgian workers were better protected than those in most other European countries because wages were indexed to inflation. Reuters

Also due this Thursday (4pm UAE time) is the European Central Bank's policy announcement on interest rates.

Markets are heavily pricing in a 25 basis point increase, which would be the ECB's first interest rate rise since 2011.

The eurozone is battling higher-than-expected inflation, but is in stark contrast to its counterparts in the US and UK, where the rate-rise cycle has already kicked in.

The interest rate differential has, as a result, piled the pressure on the euro.

This month, EUR/USD is down more than 3 per cent at the time of writing and — for the first time in 20 years — the currency pair traded at parity.

The reversal from parity was quick and sharp and while EUR/USD now finds consolidation above 1.01 levels, that parity level continues to remain a vital psychological support level.

The recent dollar strength has kept gold bulls in check and I expect the precious metal to continue to trade range bound with a slight bearish bias

Gaurav Kashyap,
risk manager at Equiti Securities Currencies Brokers

If we see a dovish ECB over the coming months, the parity level could be tested much more strongly before the end of summer.

Meanwhile, gold — normally a safe-haven hedge against rising inflation — had sunk to $1,716 levels at the time of writing.

The recent dollar strength has kept gold bulls in check and I expect the precious metal to continue to trade range bound with a slight bearish bias.

The channel between $1,665 and $1,680 remains a vital support level in the short term and initiating longs here could prove to be the most productive strategy. However, upsides will be capped at $1,745 levels throughout July.

Other crucial data points to look out for on the economic calendar this month include US home sales, which is due out on July 26, and the US gross domestic print on July 28. GDP is expected to come in at 1 per cent quarter on quarter, compared with a previous reading of negative 1.6 per cent.

Gaurav Kashyap is risk manager at Equiti Securities Currencies Brokers. The views and opinions expressed in this article are those of the author and do not reflect the views of Equiti Securities Currencies Brokers

THE BIO

Ms Davison came to Dubai from Kerala after her marriage in 1996 when she was 21-years-old

Since 2001, Ms Davison has worked at many affordable schools such as Our Own English High School in Sharjah, and The Apple International School and Amled School in Dubai

Favourite Book: The Alchemist

Favourite quote: Failing to prepare is preparing to fail

Favourite place to Travel to: Vienna

Favourite cuisine: Italian food

Favourite Movie : Scent of a Woman

Sholto Byrnes on Myanmar politics

Why Myanmar couldn't rise to meet the world's expectations

Suu Kyi's unholy alliance with Orban is a new despicable low

The halo that once crowned Suu Kyi has been replaced

The Bio

Favourite Emirati dish: I have so many because it has a lot of herbs and vegetables. Harees (oats with chicken) is one of them

Favourite place to go to: Dubai Mall because it has lots of sports shops.

Her motivation: My performance because I know that whatever I do, if I put the effort in, I’ll get results

During her free time: I like to drink coffee - a latte no sugar and no flavours. I do not like cold drinks

Pet peeve: That with every meal they give you a fries and Pepsi. That is so unhealthy

Advice to anyone who wants to be an ironman: Go for the goal. If you are consistent, you will get there. With the first one, it might not be what they want but they should start and just do it

Recipes to try

Zatar chicken from the kitchen star Dalia Dogmoch Soubra

Oatcakes with lemon and zatar

Living in...

This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

On Women's Day

Dr Nawal Al-Hosany: Why more women should be on the frontlines of climate action

Shelina Janmohamed: Why shouldn't a spouse be compensated fairly for housework?

Samar Elmnhrawy: How companies in the Middle East can catch up on gender equality

The National Editorial: Is there much to celebrate on International Women's Day 2021?

While you're here

Joyce Karam: Chaotic first debate unlikely to swing undecideds

Hussein Ibish: Donald Trump's 3-step plan to cling to power

Sulaiman Hakemy: Make America lose again

Singham Again

Director: Rohit Shetty

Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone

Rating: 3/5

What is a black hole?

1. Black holes are objects whose gravity is so strong not even light can escape their pull

2. They can be created when massive stars collapse under their own weight

3. Large black holes can also be formed when smaller ones collide and merge

4. The biggest black holes lurk at the centre of many galaxies, including our own

5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed

TCL INFO

Teams:
Punjabi Legends Owners: Inzamam-ul-Haq and Intizar-ul-Haq; Key player: Misbah-ul-Haq
Pakhtoons Owners: Habib Khan and Tajuddin Khan; Key player: Shahid Afridi
Maratha Arabians Owners: Sohail Khan, Ali Tumbi, Parvez Khan; Key player: Virender Sehwag
Bangla Tigers Owners: Shirajuddin Alam, Yasin Choudhary, Neelesh Bhatnager, Anis and Rizwan Sajan; Key player: TBC
Colombo Lions Owners: Sri Lanka Cricket; Key player: TBC
Kerala Kings Owners: Hussain Adam Ali and Shafi Ul Mulk; Key player: Eoin Morgan

Venue Sharjah Cricket Stadium
Format 10 overs per side, matches last for 90 minutes
Timeline October 25: Around 120 players to be entered into a draft, to be held in Dubai; December 21: Matches start; December 24: Finals

MATCH INFO

Manchester United 1 (Rashford 36')

Liverpool 1 (Lallana 84')

Man of the match: Marcus Rashford (Manchester United)

Getting there

The flights

Flydubai operates up to seven flights a week to Helsinki. Return fares to Helsinki from Dubai start from Dh1,545 in Economy and Dh7,560 in Business Class.

The stay

Golden Crown Igloos in Levi offer stays from Dh1,215 per person per night for a superior igloo; www.leviniglut.net

Panorama Hotel in Levi is conveniently located at the top of Levi fell, a short walk from the gondola. Stays start from Dh292 per night based on two people sharing; www. golevi.fi/en/accommodation/hotel-levi-panorama

Arctic Treehouse Hotel in Rovaniemi offers stays from Dh1,379 per night based on two people sharing; www.arctictreehousehotel.com

88 Video's most popular rentals

Avengers 3: Infinity War: an American superhero film released in 2018 and based on the Marvel Comics story.

Sholay: a 1975 Indian action-adventure film. It follows the adventures of two criminals hired by police to catch a vagabond. The film was panned on release but is now considered a classic.

Lucifer: is a 2019 Malayalam-language action film. It dives into the gritty world of Kerala’s politics and has become one of the highest-grossing Malayalam films of all time.

The specs

Engine: 3.9-litre twin-turbo V8

Power: 640hp

Torque: 760nm

On sale: 2026

Price: Not announced yet

The biog

Age: 59

From: Giza Governorate, Egypt

Family: A daughter, two sons and wife

Favourite tree: Ghaf

Runner up favourite tree: Frankincense

Favourite place on Sir Bani Yas Island: “I love all of Sir Bani Yas. Every spot of Sir Bani Yas, I love it.”

The specs

Engine: 3.5-litre V6

Power: 272hp at 6,400rpm

Torque: 331Nm from 5,000rpm

Transmission: 8-speed auto

Fuel consumption: 9.7L/100km

On sale: now

Price: Dh149,000

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more from Janine di Giovanni

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Fixtures (all in UAE time)

Friday

Everton v Burnley 11pm

Saturday

Bournemouth v Tottenham Hotspur 3.30pm

West Ham United v Southampton 6pm

Wolves v Fulham 6pm

Cardiff City v Crystal Palace 8.30pm

Newcastle United v Liverpool 10.45pm

Sunday

Chelsea v Watford 5pm

Huddersfield v Manchester United 5pm

Arsenal v Brighton 7.30pm

Monday

Manchester City v Leicester City 11pm

SPEC%20SHEET%3A%20APPLE%20IPHONE%2014

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England Test squad

Joe Root (captain), Moeen Ali, James Anderson, Jonny Bairstow (wicketkeeper), Stuart Broad, Jos Buttler, Alastair Cook, Sam Curran, Keaton Jennings, Dawid Malan, Jamie Porter, Adil Rashid, Ben Stokes.

On Women's Day

Dr Nawal Al-Hosany: Why more women should be on the frontlines of climate action

Samar Elmnhrawy: How companies in the Middle East can catch up on gender equality

The National Editorial: Is there much to celebrate on International Women's Day 2021?

Justin Thomas: Challenge the notion that 'men are from Mars, women are from Venus'

Scoreline

Swansea 2

Grimes 20' (pen), Celina, 29'

Man City 3

Silva 69', Nordfeldt 78' (og), Aguero 88'

Spider-Man%202

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Dust and sand storms compared

Sand storm

Particle size: Larger, heavier sand grains
Visibility: Often dramatic with thick "walls" of sand
Duration: Short-lived, typically localised
Travel distance: Limited
Source: Open desert areas with strong winds

Dust storm

Particle size: Much finer, lightweight particles
Visibility: Hazy skies but less intense
Duration: Can linger for days
Travel distance: Long-range, up to thousands of kilometres
Source: Can be carried from distant regions

Tomorrow 2021

Crown Prince reveals Tomorrow 2021 plan for Abu Dhabi's economy

The UAE explained: What are the new plans for the economy and why do we need them?

Abu Dhabi's plans to liberalise the economy are progressing fast - but how are other countries planning for post-oil?

UAE-wide visa changes: Expats imagine life after work in the UAE

The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Read part four: an affection for classic cars lives on

Read part three: the age of the electric vehicle begins

Read part two: how climate change drove the race for an alternative

More on animal trafficking

Falcon demand driving region's bird smuggling trade

Custom-made smuggling vests used to smuggle ivory onto aircraft

More from Neighbourhood Watch:

Away from Dubai's glitz, Hatta is where present and past collide

A rare glimpse of Bedouin life in the humble border town of Qoa

How old Dubai moved with the times and kept its heart

Pathaan

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While you're here

Kareem Shaheen: In Syria and elsewhere, women often bear the brunt of war

Janine di Giovanni: What we don't get about women in politics and war

Taliban's female assassins who lured men to their deaths released

box

COMPANY PROFILE

Company name: Letstango.com

Started: June 2013

Founder: Alex Tchablakian

Based: Dubai

Industry: e-commerce

Initial investment: Dh10 million

Investors: Self-funded

Total customers: 300,000 unique customers every month

Engine: 5.6-litre V8

Transmission: seven-speed automatic

Power: 400hp

Torque: 560Nm

Price: Dh234,000 - Dh329,000

On sale: now

If you go...

Etihad Airways flies from Abu Dhabi to Kuala Lumpur, from about Dh3,600. Air Asia currently flies from Kuala Lumpur to Terengganu, with Berjaya Hotels & Resorts planning to launch direct chartered flights to Redang Island in the near future. Rooms at The Taaras Beach and Spa Resort start from 680RM (Dh597).