Following last week’s labor data dump, this week’s economic calendar is relatively light with market participants likely to focus more on Fed communications which might come in Fed minutes release on Wednesday. On the June NFP, it looked more noise than any signal and we expect policymakers to treat it accordingly. Chair Warsh leaned dovish at the ECB’s Sintra forum and we expect Fed to remain on hold for REMCY26 till Fed receives recommendations from it's task forces. Warsh's own framing appeared closer to dovish policymakers, who have attributed elevated inflation partly to energy prices and tariffs. Reportedly, former BOE Governor Mervyn King is likely to co-chair the Fed’s communications task force. King’s reported role reinforces the idea that the communications task force may recommend a less explicit Fed communication strategy. From a market perspective it implies higher term premium & higher vols. In this week US macro data, we have ISM services, existing home sales and initial jobless claims. We continue to believe that Fed might remain on hold for REMCY26 as inflation cools down just enough to support Warsh & other doves. Employment situation still looks stable but might not remain so after Sep’26. Hence if there is no middle east conflict re escalation, Fed might just wait entire H2CY26 to see how the labor-inflation dynamics evolve. Markets are currently pricing in 30 bps of hike by end CY26. 1yr-1yr US SOFR remains our strong conviction idea based on above view, but the entry is yet to be triggered. We like receiving half risk at 4.15 and another half at 4.25 with stop at 4.4 and TP at 3.90. It’s recent high was at 4.12 before cooling down to current levels of 3.98. In Row macro data, we have German factory orders, Euro area Sentix survey, German industrial production & Chinese PPI/CPI data. We also like being bullish on DXY till Sep against JPY and GBP. We are neutral on EURO against USD.
