The economic calendar picks up meaningfully this week with the main highlights being Tuesday’s CPI and Wednesday’s PPI releases which coincide with Fed Chair Warsh’s first Humphrey-Hawkins testimony before the House Financial Services and Senate Banking Committees. In US macro data this week we have retail sales, PPI, CPI, initial jobless claims and Univ of Michigan prelims for July. We expect the growth momentum to continue in US data for now. We see Q2CY26 GDP tracking currently at 2.3% q-o-q ar. In Fed speak this week, there is a deluge of speakers ahead of the communications blackout period, which starts at the end of the week. Communications this week will be the last opportunity for officials to provide any signals to the market about policy leanings ahead of the July FOMC meeting. Despite the continued strength in June m-o-m core PCE inflation, a negative reading of headline inflation and upcoming PCE methodology changes will likely keep the Fed patient on rate hikes for REMCY26. We maintain our monetary policy outlook of no rate hikes for REMCY26. Markets are currently pricing in 37 bps of hike in REMCY26 which looks just about stretched to us. 1yr-1yr US SOFR remains our high 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. Last week it made a high of 4.09 before cooling down to current levels of 4.08. We also like being bullish on DXY till Sep against JPY and GBP. On the middle east conflict, we believe current series of escalations implies markets building in some amount of risk premium and hence brent prices are likely to range between 75-85 in short term. We still believe both sides do not want a full fledged war and might return to negotiations sooner than later. In RoW macro data, we have Euro area industrial production, Euro area final HICP readings and UK monthly GDP data. We also have BOC meeting on Wednesday where we expect Bank of Canada to remain on hold.
