We expect core CPI inflation remained relatively stable at 0.20% m-o-m in June, after a 0.208% advance in May. We expect super core CPI inflation accelerated to 0.36% m-o-m in June, following a 0.27% advance in May. Core goods inflation remained in contractionary territory due to waning impact from tariffs & lower used vehicle prices. We see likely headline inflation at -.2% MoM. While June core PCE inflation likely remained above an annual rate of 2%, we expect the anticipated negative headline inflation and upcoming methodological changes to PCE prices will keep the Fed on hold 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.
