In US macro data, the economic calendar picks up this week with market participants and Fed policymakers alike focused on the July CPI (Tuesday) and PPI (Thursday) releases. A 2.4% decrease in seasonally adjusted gas prices should weigh on headline CPI (+0.24% our forecast vs. +0.29% previous) relative to our core projection (+0.30% vs. previous +0.23%). Shorter-term trends for core would be mixed with the three-month annualized rate rising three-tenths to 2.7% while the six-month rate would drop by that amount to 2.4%. We expect year-over-year core CPI inflation of +3.2% and core PCE inflation of +3.2% in December 2025 (or +2.4% for both measures excluding the effects of tariffs). We believe that employment data recently has started showing significant cracks as witnessed in elevated continuing claims (4 yr highs), downwards revisions in NFP by 258k for May & June, both ISM manufacturing & services showing weak employment index readings as well as regional Fed surveys. If July CPI comes at 0.3% MoM which we expect, then probability of a 50-bps cut in 17th Sep FOMC rises. We expect Miran to be confirmed before the Sep FOMC. Neutral Fed speakers such as Daly & Cook have started speaking being alarmed about employment situation which tells us the majority is turning in favour of front-loaded rate cuts. We expect 100-125 bps cut by Mar’26 & a very strong possibility of a 50-bps cut in Sep meeting. Markets are currently pricing in only 57 bps of cut by end CY25 which we believe is an opportunity to receive Dec’25 SOFR futures. On tariff front, there is difference between trade weighted tariff expectation & actual custom duty collection levels. By trade weighted calculation of CY24, tariff levels are now 16% but actual customs collection was only 10% in June. Total US imports for consumption amounted to $258.3bn in June 2025, yet only 48% of this value was dutiable. Consequently, despite a nearly 20% average tariff on dutiable goods, the overall effective tariff rate—based on Census Bureau data—remained below 10%. The limited increase in effective tariffs so far is largely due to trade diversion away from China and many exemptions, including USMCA and a long list of goods entering duty-free without trade programs. There is no dated UST supply this week. In Fed speak we have Barkin (non voting), Goolsbee (voting), Bostic (non voting) speaking this week post US CPI data on Tuesday. In Row events, we expect a dovish 25 bps cut by RBA on 12th August. In Eurozone, we expect weak ZEW survey as well as industrial production. We continue to expect one last cut of 25 bps by Dec'25 from ECB as growth slows and inflation undershoots. in UK we have labor data which might continue to remain weak but BOE might focus more on it's inflation mandate as seen by last week's 5-4 vote and increase in CPI projections.
