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The Fed's inflation dilemma gets deeper, Trump set to revamp his Russia response teams, health-care vote delayed by surgery for Senator John McCain and China expected to report steady economic expansion.

Reflation Deflated 

The U.S. consumer price index was little changed in June, signaling inflation may take even longer to reach the Federal Reserve’s goal than had been thought. That rounded out a dismal data dump that included a shocker of a drop in retail sales -- they fell for a second month to undermine the outlook for second-quarter GDP -- and a report showing consumer sentiment slid to a nine-month low. The reports highlighted the conundrum at the Fed, whose models say go (hike rates), while data is saying "No, No, No!''  Stocks rallied to fresh records and the dollar slumped as the fading expectations for Fed rate hikes emboldened dollar bears who were already the most aggressive since 2013. Treasury yields posted their largest weekly retreat in more than a month, putting the $10 million strangle in the money. 

China Syndrome

China reported that its economy maintained momentum last quarter, as global trade and domestic demand spurred a pickup at the nation’s factories. Gross domestic product expanded 6.9 percent from a year earlier, matching the first quarter and outpacing economists' expectations for 6.8 percent. Other data showed improvements in industrial production, fixed-asset investment and retail sales growth.  It all highlights the resilience of China’s economy even as policy makers have tried to curb excessive and speculative borrowing. The data also came after a closed-door conference on regulation, with President Xi Jinping announcing a cabinet-level committee to coordinate financial oversight -- a task currently divided among four regulators including the People’s Bank of China. Xi's hand was also seen in the fall from grace of the youngest member of the ruling Politburo.

Trump Teaming

The White House tapped veteran Washington lawyer Ty Cobb to oversee legal and media responses to probes into Russian meddling in the 2016 election campaign.  President Donald Trump is planning to shake up his legal team, according to a person familiar with the matter, and he is also evaluating options for communications staffing. Long-time personal counsel Marc Kasowitz may be eased into a less prominent role and the reports add to speculation surrounding White House Press Secretary Sean Spicer -- whose last on-camera press briefing was on June 20. The top Democrat on the Senate Intelligence Committee called for more investigation into the Trump campaign's digital activities. Meanwhile,  Trump is kicking off “Made in America” week to champion companies that build products in the U.S. He's also heading back to the Supreme Court over the travel ban, asking the justices to let the government bar entry into the U.S. by people with grandparents and cousins in the country.

Health Scare

The Trumpcare bill was hit by another delay, as Republican Majority Leader Mitch McConnell said late Saturday that he’s postponing plans to begin a Senate debate in the next few days as Republican Senator John McCain will be home in Arizona recovering from unexpected surgery. Republican leaders are reportedly planning for the Senate to move first in August to raise the U.S. debt limit, with the House to act later. The glacial pace of U.S. legislative progress was among the reasons JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon is hopping mad about what's happening to America's reputation abroad and to businesses' capacity to perform at home. “It’s almost an embarrassment being an American traveling around the world,” Dimon, 61, said on a conference call with analysts. 

Thursday Central

Central banks in Japan and Europe will hand down decisions to change nothing about their current extraordinary stimulus measures. At least that is the consensus among analysts. Bank of Japan Governor Haruhiko Kuroda, fresh from tweaking bond purchase operations last week, is expected to leave the short- and long-term policy rates at minus 0.1 percent and zero, respectively. That's even as a majority of economists surveyed by Bloomberg said that the BOJ's goal of stable inflation above 2 percent is unattainable in Japan in the foreseeable future. As for the European Central Bank, it will probably hold fire this week and wait until September before slowing the pace of its bond-buying program, a Bloomberg survey shows. The rollback is seen starting in January and taking nine months, up from the previously predicted seven months. 

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