This week’s economic calendar features only a light smattering of data as Fed officials will be in their usual communications blackout ahead of next week’s FOMC meeting on 29th July. Last week's US inflation data had many surprises on the downside. June’s headline CPI (-0.42% vs. +0.47%) declined given the almost 10% fall in motor fuel prices. However, core CPI (-0.02% vs. +0.21%) came in meaningfully weaker than expectations. Taken together with the CPI data and import prices, we are tracking +0.18% for June core PCE, which would correspond to 3.3% year-over-year barring any revisions. Looking ahead, we expect easing tariff effects and residual seasonality to keep core PCE inflation on a gradual disinflationary path. A 0.2% monthly core PCE print would represent further progress toward the Fed’s inflation objective and should reduce the likelihood of rate hikes in the near term. We see a Fed on hold for REMCY26 as inflation seems to be cooling down in momentum and might further see another leg down from Sep’26. Our trade idea on 1yr-1yr US SOFR receive at 4.15 was triggered last week and is currently at 4.04. We have a profit target of 3.90 and a SL of 4.40. Half of the risk was initiated at 4.15 and another half will be initiated at 4.25. We continue to remain bullish on DXY & like JPY shorts at current levels. In US macro data this week, we have initial jobless claims, S&P PMIs & new home sales. In dated UST supply, we have $13 BN of 20yr UST auction on Wednesday & $21 BN of 10yr TIPS on Thursday. The 2nd round of US Iran war has gained momentum & we expect Brent to open near $90 levels on Monday Asia morning. In RoW data, we have ECB meeting on Thursday where we expect a neutral hold. We also have Canada CPI data due on Monday & UK CPI data due on Wednesday.
