This week's focus in US macro data will be Wednesday’s minutes from the July 29 FOMC meeting. While the minutes are slightly stale considering last week’s CPI inflation report, we will be looking closely into details of the “good family fight” that Chair Warsh described in his post-meeting press conference. Regarding last week’s inflation data, July CPI and PPI data broadly came in line with our expectations. On net, we have revised up our July core PCE forecast to 0.23% m-o-m from our pre-CPI estimate of 0.21% m-o-m. On a y-o-y basis, our forecast suggests core PCE inflation remained essentially unchanged at 3.28%. Last week saw a very weak retail sales data which was likely due to negative payback after Prime Day sales boosted this component in June. Overall, we think that temporary factors that boosted spending in Q2 waned and weighed on spending in July. In US macro data next week we have housing starts, industrial production, pending home sales & initial jobless claims. On July FOMC minutes itself, we expect the minutes to clarify that a majority of policymakers remain comfortable with a wait-and-see approach to potential rate hikes. We expect Fed to remain on hold for REMCY26 as we expect a non-escalating middle east conflict along with subdued core PCE around 0.2% MoM. We expect payrolls to worsen from Sep’26 onwards and as we approach 3rd Nov US elections, we expect more weakness in US macro data as economic decision-making stalls in anticipation of election results. Based on prevailing conditions, our view is that post elections, democrats might be in majority in both Senate & House of representatives. We will be coming out soon with a detailed report on the same. In UST dated supply, we have $16 BN of 20 year UST auctions on Wednesday & $8 BN of 30 year TIPS on Thursday. In rest of the world data, we have European PMIs, UK CPI, UK retail sales & Canadian CPI. On middle east conflict, we have a "no war no peace" situation. President Trump wants to impose more sanctions on Iran so as to cripple it’s economy but markets are not so optimistic about the pain threshold of Iran. Iran current stance implies it wants US to feel the pinch of higher gasoline prices as US house elections approach in early November. Between this tussle of which party has a higher pain threshold, the rest of the world including middle east oil exporting countries & oil importing countries are suffering economic consequences. In the current state of SoH, crude is likely range bound between 85-95 levels for Brent in near term.
