With the July employment report in the rear-view mirror, the focus for this week turns to the other side of the Fed’s dual mandate: inflation. Headline nonfarm payrolls (NFP) surprised to the downside in July, declining 23k (consensus 80k, our estimate 125k) alongside large negative revisions to prior months. Household survey details improved as the unemployment rate fell for the second consecutive month to 4.1%, driven by a historically low rate of job losses. In this week's US CPI data for July, we estimate core CPI to come at 0.17% MoM. In other US macro data, we have retail sales, PPI, initial jobless claims & University of Michigan. In dated UST supply this week we have $58 BN of 3 year supply on Tuesday, $42 BN of 10 year supply on Wednesday & $25 BN of 30 year supply on Thursday. We continue to expect Fed to remain on hold for REMCY26 as inflation cools down. We do not see any signs of wage inflation as real earnings remain -ve. July NFP data of -20k has reenforced our view of a long hold from Fed. Our trade of 1yr-1yr US SOFR (half risk received at 4.15 & another half at 4.25) is now at 4.09 on Friday’s close. Our profit target is 3.90 and stop loss is at 4.4. Markets are still pricing in 28 bps of hike by Dec’26 which provides us comfort on our above trade idea. In middle east conflict, there is no clear resolution yet & brent is range bound between 80-85 levels. But we are now more worried on the refined products prices such as diesel, ATF where prices have gone up significantly. In RoW macro data this week, we have Euro Sentix survey, Eurozone industrial production & UK GDP data.
