The main highlight of today's session will be the latest reading of US CPI for Jun, where markets are anticipating the headline rate to decelerate -0.1% MoM to 1.2% YoY. Obviously, inflation readings in the US are unlikely to be viewed with any anticipation that a higher reading will prompt a hike just yet, but the release does take on a greater significance in the light of recent Fed rhetoric. Richmond Fed President Lacker commented yesterday that he would not like to see inflation much lower than this and added that inflation expectations pointed to actual inflation heading higher in the coming months. Obviously, the big risk is that today's print (like many recent inflation readings from the G10) will err to the low end of expectations, in which case we could get another wave of pressure on US Treasury yields. Given the correlation between Treasury yields and USDJPY of late, we would therefore expect a below expectation CPI print to force another leg lower in USDJPY - which is already perched precariously on one of its last support levels (86.97) ahead of the November 2009 lows at 84.83. Elsewhere the market is largely being driven by position covering as more and more participants drift off for summer holidays; the major beneficiaries are predictably EURUSD and GBPUSD (both of which have gained around 2.5% over the course of the week), and given these moves have broken a number of significant resistance levels along the way, we feel the follow-through could take us back above 1.3000 in EURUSD and 1.5500 in GBPUSD.