Week in Review

Manufacturing and labor data beat expectations. ISM Manufacturing PMI exceeded consensus and lifted the employment sub-index. JOLTs job openings rose more than expected, marking the largest positive surprise in months. ADP private payrolls added more positions than consensus. These releases reinforced the view that the expansion retains momentum.

Equity markets reversed early gains. The S&P 500 advanced early in the week before closing at 7383.74, a 2.85 percent net decline. Nasdaq 100 fell 5.1 percent to 28957.6 while the Dow Jones ended at 50866.78, down 0.42 percent week-over-week. Russell 2000 declined 2.49 percent to 2833.5. The rotation reflected higher oil prices early in the period followed by profit-taking and geopolitical caution.

Oil and Treasury moves dominated cross-asset pricing. WTI Crude climbed higher mid-week before settling at 90.54, a 1.76 percent weekly decline. US 2-year yields held steady while the 10-year remained unchanged. EUR/USD eased 1.04 percent to 1.15 and USD/JPY rose 0.59 percent to 160.29. Gold dropped 2.46 percent to 4365.3 as safe-haven demand faded after initial spikes.

Policy signals stayed neutral. Fed speakers delivered remarks interpreted as data-dependent with no explicit easing bias. Unemployment and CPI readings anchored the policy rate. Services PMI exceeded consensus, extending the expansion signal across sectors.

Fed Watch

Federal Reserve speakers throughout the week reiterated data dependence without altering guidance. Comments early in the week were viewed as neutral on near-term policy. Later addresses focused on regional conditions and the inflation outlook. No FOMC minutes or decisions occurred. Stronger ISM and JOLTs prints reinforced the case for holding the policy rate steady. OIS curves continue to price steady policy through the medium term. Geopolitical oil moves add upside risk to the inflation path but have not yet shifted the median dot projection. We continue to monitor labor data for any signs of abrupt softening that could reopen cut expectations.

Data Review

ISM Manufacturing PMI climbed above consensus, with the employment sub-index rising. JOLTs job openings jumped versus expected and prior levels, indicating sustained labor demand. ADP Employment Change beat consensus. Services Sector PMI reached above expected levels, extending the services expansion. Factory Orders rose more than forecast. These beats collectively point to mid-expansion resilience rather than cooling. The data support a steady Fed rate path with limited near-term easing priced into OIS curves. Upstream price pressures from oil volatility remain the key risk to the inflation outlook. Labor-market strength continues to anchor growth forecasts without triggering contraction signals.

The Week Ahead

Trade balance data are due early in the week. Existing Home Sales are scheduled mid-week. Core and headline CPI prints will arrive later in the week. These inflation prints will directly inform the medium-term rate path. Mortgage rate and crude stock data complete the calendar. Fed speakers remain on the schedule, maintaining the data-dependent tone. Markets will assess whether the prior week's labor and PMI strength offsets any CPI upside surprise. Oil inventory data will continue to influence energy prices and imported inflation risks.

Risks & Themes

Stronger labor demand data have reduced near-term recession odds but keep inflation vigilance elevated. Oil volatility creates upside headline risk that could delay any future easing. Equity positioning appears crowded after the early-week rally, with the S&P 500 now 2.85 percent lower on the week. Volatility measures may rise if CPI prints exceed expectations. Flow data show continued rotation out of rate-sensitive sectors. Upside growth scenarios support holding the policy rate steady while downside oil moves could reopen modest cut pricing. We see limited mispricing in OIS curves given the current data dependence.

Cross-Asset

Equities posted a net weekly decline after early gains, with the S&P 500 closing at 7383.74, down 2.85 percent. Nasdaq 100 fell 5.1 percent to 28957.6 while the Dow Jones ended at 50866.78, off 0.42 percent. Russell 2000 declined 2.49 percent to 2833.5. Bonds saw limited movement. EUR/USD fell 1.04 percent to 1.15 and GBP/USD declined 0.85 percent to 1.33, while USD/JPY rose 0.59 percent to 160.29. Commodities swung sharply: WTI Crude ended at 90.54 after reaching higher levels, and gold dropped 2.46 percent to 4365.3. Bitcoin fell 15.95 percent to 61843.51 amid risk-off sentiment.

Global Context

Brent crude movements and Middle East developments spilled into US energy prices, lifting WTI higher intraday before the retreat to 90.54. Dollar strength weighed on EUR/USD to 1.15 and supported USD/JPY at 160.29. Gold's 2.46 percent decline reflected reduced safe-haven demand outside the United States. Trade balance and import level data due next week will capture any tariff-related shifts in goods flows. Geopolitical risks remain the dominant cross-border transmission channel for the coming seven days.

Week in Review

Inflation reacceleration in smaller economies set the tone for the week. Dutch headline inflation accelerated sharply, exceeding prior prints and reviving concerns that the disinflationary impulse from earlier energy-price declines was fading. This print arrived alongside German retail sales that held above consensus, indicating household spending remained soft but not collapsing. Spanish unemployment declined less than expected, underscoring labor-market resilience that could sustain wage pressures. Italian manufacturing PMI beat consensus while Spanish manufacturing PMI missed, highlighting persistent divergence within the bloc.

Services momentum diverged sharply across borders. Spanish services PMI jumped, crossing into expansion territory, whereas Italian services PMI eased and German services PMI rose. These mixed readings suggested activity remained uneven rather than uniformly cooling. OECD lowered its German growth forecast again, citing Middle East conflict spillovers that weighed on consumption and investment.

Markets responded with higher yields and selective equity rotation. German 10-year Bund yields climbed, reflecting firmer rate-hike expectations priced into ECB OIS curves. Euro Stoxx 50 posted a modest weekly gain to 6062.07 while DAX declined to 24759.05, illustrating country-level dispersion. EUR/USD fell 1.04% to 1.15, pressured by the yield differential and Brent crude’s 1.99% drop to 93.09. The week therefore marked a shift from broad disinflation relief toward renewed vigilance on price pressures without yet derailing the mid-expansion phase.

ECB Watch

No Governing Council speakers appeared during the week, leaving markets to interpret data through the lens of existing forward guidance. German 10-year Bund yields climbed as OIS curves priced a higher probability of near-term rate stability or modest hikes around the 2.00% deposit rate. Dutch inflation introduced fresh upside risk to the June Eurozone aggregate, potentially delaying any easing signals. Mixed PMI prints reinforced the ECB’s data-dependent stance without shifting the medium-term rate path materially. Prior weeks’ oil-relief impulse continued to support the view that headline inflation could moderate later, yet the current week’s price prints kept markets from embedding aggressive cuts. The absence of new rhetoric left the deposit rate at 2.00% as the baseline, with traders now watching June aggregates for confirmation of the Dutch-led reacceleration.

Data Review

German retail sales beat consensus, confirming that consumer demand remained subdued but avoided a deeper contraction. Dutch inflation accelerated, the largest upside surprise of the week and a clear signal that imported price pressures had not fully dissipated. Italian manufacturing PMI rose, pointing to continued expansion in Italy’s industrial base. Spanish manufacturing PMI missed forecasts, illustrating softening momentum in Spain’s factory sector. Spanish services PMI surged, crossing the 50 threshold and suggesting services activity was reaccelerating after prior weakness. Italian services PMI eased, remaining in contraction but showing only modest further deterioration. Spanish unemployment declined less than expected, which reinforced labor-market tightness. These releases collectively indicate the euro-area cycle remains in mid-expansion with uneven price and activity signals that keep the ECB on a data-dependent path. The inflation uptick in the Netherlands and resilient Italian manufacturing together argue against an imminent easing bias, while soft German retail sales cap the scope for aggressive tightening.

The Week Ahead

German factory orders, trade balance, and industrial production data are due, providing an early read on industrial pipeline strength. Italian industrial production prints follow. These releases will clarify whether the week’s mixed PMI signals translate into broader activity weakness or stabilization. No ECB speakers are currently listed, keeping focus on the data flow. Markets will assess whether the Dutch inflation surprise feeds into June Eurozone aggregates and alters OIS pricing around the 2.00% deposit rate.

Risks & Themes

The Dutch inflation spike raises the possibility that euro-area disinflation stalls, shifting the balance of risks toward a longer hold at the 2.00% deposit rate. OECD’s further downgrade to German growth forecasts highlights downside risks from Middle East spillovers that could weigh on consumption without triggering a broad contraction. Positioning in Bunds appears extended after the move higher, leaving room for volatility if upcoming German industrial data disappoint. Equity flows showed rotation away from DAX into CAC 40, signaling selective rather than bloc-wide risk appetite. Volatility in Brent crude remains a key swing factor for imported inflation. Market pricing of ECB hikes appears modest relative to the inflation prints, suggesting potential for further OIS repricing if June data confirm the Dutch trend.

Cross-Asset

Euro Stoxx 50 rose 0.45% to 6062.07 on the week while DAX fell 0.98% to 24759.05 and CAC 40 gained 0.88% to 8218.24, reflecting country-level divergence tied to inflation and PMI prints. German 10-year Bund yields climbed, up sharply from prior levels as markets repriced ECB hike probabilities following the Dutch inflation surprise. EUR/USD declined 1.04% to 1.15, pressured by the Bund yield rise and broader dollar strength. EUR/GBP eased 0.29% to 0.86 while EUR/JPY fell 0.51% to 184.68, showing modest euro underperformance across pairs. Brent crude dropped 1.99% to 93.09 amid the mixed services data, while gold declined 2.46% to 4365.30 on reduced safe-haven demand. Bitcoin fell 15.75% to 61992.95, amplifying risk-off flows late in the week.

Global Context

Brent crude’s weekly decline to 93.09 eased imported inflation pressure for net importers but reversed only part of the prior month’s volatility. EUR/USD’s 1.04% drop to 1.15 reflected both higher Bund yields and broader dollar resilience amid global data dependence. Gold’s 2.46% fall to 4365.30 signaled reduced safe-haven demand as equity markets posted modest net gains. Cross-border spillovers from Middle East tensions continued to weigh on German growth forecasts. Trade dynamics showed limited immediate reaction to the EU defence-bond framework advanced by finance ministers.

Week in Review

Intervention and policy signals dominate price action The week opened with confirmation that Japanese authorities intervened to defend the currency in May, yet USD/JPY still advanced 0.59 percent to close at 160.29. The Nikkei 225 posted a net 0.52 percent decline to 66,588.12, illustrating how yen volatility overrode equity gains.

Ueda speech shifts rate expectations Governor Ueda’s remarks on activity and prices were interpreted as tilting toward an imminent tightening step, pushing the Japan 10-year yield higher even as shorter-term yields remained contained. Real wages rising for a fourth straight month provided the fundamental backdrop that allowed markets to price higher odds of the next BoJ move.

Data calendar and consumption resilience Attention turned to upcoming GDP and current account releases, which will reveal whether the export surplus and domestic demand can support the policy trajectory. Brent crude’s 1.99 percent weekly decline to 93.09 eased some imported inflation pressure but did not alter the BoJ’s data-dependent stance.

Cross-asset repricing Gold fell 2.46 percent to 4,365.30 and Bitcoin dropped 15.75 percent, reflecting broader risk reduction as yen carry positions faced official scrutiny. The data therefore confirm that intervention and hawkish rhetoric have anchored short-term yields while leaving longer-term normalization expectations more volatile.

BoJ Watch

Governor Ueda’s remarks reinforced the Bank of Japan’s normalization bias by linking sustained price stability to further rate adjustments. Markets responded by lifting the Japan 10-year yield and embedding higher probabilities for the next policy meeting. Real wages rising for four consecutive months supplied the wage-price momentum the BoJ has cited as a precondition for tightening. BoJ OIS curves shifted to reflect fewer cuts and a higher terminal rate over coming quarters. Officials coordinated with the Ministry of Finance on intervention but left the door open for additional measures if USD/JPY disorder persists. The combination of stronger real wages and forward guidance therefore tilts the rate path toward gradual further hikes rather than an extended pause.

The Week Ahead

Final Q1 GDP and current account data will set the tone for the coming week’s assessment of domestic demand strength. Markets will parse any follow-through comments from BoJ speakers for confirmation of the normalization pace. Household spending prints will test whether consumption can support the next rate decision. Yen moves above 160 will keep intervention risks elevated and could influence BoJ OIS pricing for upcoming meetings. The absence of other tier-one releases leaves the focus squarely on whether growth and wage data validate the higher terminal-rate path already embedded in 10-year yields. Any sustained yen strength would reduce imported inflation pressures and potentially allow the Bank of Japan to proceed more deliberately. Overall, the week’s data flow should clarify the balance between external currency pressures and internal demand conditions ahead of the next policy setting.

Risks & Themes

Persistent yen weakness despite record intervention raises the possibility that further Ministry of Finance sales of Treasurys will be required, adding volatility to USD/JPY around 160.29. An upside growth surprise in the GDP release could accelerate BoJ hike pricing and steepen the 2s10s curve. Conversely, weaker household spending would challenge the wage-price momentum narrative and could prompt markets to trim near-term tightening odds. The unwind of yen carry trades, already visible in Bitcoin’s 15.75 percent weekly drop, remains a key tail risk if intervention credibility erodes. The data therefore suggest markets are under-pricing the potential for sharper yield moves if the Bank of Japan’s next decision is brought forward.

Week in Review

Q1 GDP contraction confirms technical recession. Canada posted an annualized GDP decline in Q1, marking the second consecutive quarter of contraction and triggering the technical recession label early in the week. Markets initially absorbed the print with limited volatility as the S&P/TSX rose while USD/CAD strengthened.

Manufacturing activity cools further. The S&P Global Manufacturing PMI eased in May, extending the sequential slowdown and reinforcing concerns over factory momentum. Equity and currency markets responded with modest TSX declines as WTI crude fluctuated.

Labor market delivers sharp rebound. The May jobs report surprised higher with an employment gain and unemployment dropping, reversing the prior month’s decline and lifting participation. This outcome directly contradicted consensus expectations, prompting immediate reassessment of growth resilience.

Asset prices reflect mixed sentiment. The TSX ended the week at 34413.5 after a weekly decline, while USD/CAD settled at 1.39 and Brent crude closed at 93.09 after swinging across the period. The data arc therefore moved from recession confirmation to labor-driven pushback within five trading days.

BoC Watch

Bank of Canada officials repeatedly urged caution against over-interpreting the Q1 GDP stall as conclusive evidence of recession. The policy rate remained unchanged throughout the week with no speakers scheduled. OIS pricing showed only marginal adjustment after the strong jobs print, leaving the probability of a cut at the next meeting little changed from the prior week. The combination of softer PMI readings and resilient employment leaves the Bank of Canada in a data-dependent holding pattern ahead of the upcoming decision. Forward guidance continues to stress that tariff uncertainty and commodity volatility warrant a cautious stance rather than immediate easing.

The Week Ahead

The Bank of Canada Interest Rate Decision is expected to leave the policy rate unchanged, with the accompanying press conference likely to reiterate data dependence. Trade Balance data will provide an early read on export momentum following the Q1 GDP contraction and recent energy price swings. Markets will focus on whether the strong May employment print alters the Bank of Canada’s assessment of slack in coming quarters. Any hawkish tilt in the press conference could support the Canadian dollar and push OIS curves toward fewer cuts through year-end. Conversely, dovish language on growth risks would keep easing probabilities alive despite the labor beat. The releases together will shape expectations for the timing of the first rate adjustment in the current cycle.

Risks & Themes

The strong May jobs outcome reduces near-term recession probabilities but leaves downside risks from tariff uncertainty and softer manufacturing intact. Oil price volatility, with WTI ending at 90.54 after a 1.76% weekly decline, continues to influence CAD crosses and inflation dynamics. Markets appear to be underpricing the possibility that resilient employment could delay easing even as GDP weakness persists into the second half. Upside surprises in upcoming activity data would reinforce the Bank of Canada’s hold stance, while further PMI deterioration could reintroduce cut expectations. The week’s arc highlights how single data points can rapidly shift the balance between growth concerns and policy patience.

Week in Review

Business Confidence Weakens Mexico’s Business Confidence Index declined in May, extending the recent softening trend. The print arrived alongside stable short-term rates and no Banxico commentary, leaving markets to interpret the decline as a domestic signal rather than a policy trigger.

Equity Markets Sell Off IPC Bolsa recorded a net 2.93% decline to 66,141.38 across the five trading sessions. The pullback concentrated in financials while nearshoring-exposed industrials showed relative resilience amid ongoing USMCA renewal discussions.

Peso Holds Range Despite Commodity Swings USD/MXN closed the week at 17.46 after posting a modest 0.69% weekly gain. EUR/MXN finished at 20.16, little changed on net, as remittances and contained inflation prints continued to support the currency even as WTI Crude fell 1.76% to 90.54.

Fixed-Income Curve Steepens Modestly Short-term rates remained steady while the long-term rate held higher, producing a modest steepening bias consistent with limited near-term easing expectations. No OIS repricing occurred in the absence of Banxico speakers or fresh inflation data.

Commodity Exposure Adds Volatility Brent Crude declined 1.99% to 93.09 and silver dropped 7.87% to 69.10, weighing on energy-linked names and contributing to the equity selloff. Gold fell 2.46% to 4,365.30, offering little offset during the risk-off tone.

External Balances Remain Supportive Remittances and auto exports continued to underpin the external position, offsetting softer domestic confidence readings. Nearshoring investment announcements, including Spanish commitments through 2030, provided a structural counterweight to the weekly data weakness.

No Policy Signals Emerge Banxico maintained its blackout ahead of the next decision, leaving short-term rates unchanged and OIS curves stable. The data flow therefore reinforced a wait-and-see stance rather than altering the expected rate path.

Week Closes with Data Dependence The combination of the weaker confidence print, equity weakness, and stable rates points to a domestic softening that has not yet translated into market pricing for earlier easing. Markets now turn to the upcoming inflation release for the next directional cue.

Banxico Watch

Banxico officials stayed in blackout throughout the week, producing no speeches or minutes that could shift forward guidance. Short-term policy rates remained fixed while the long-term rate held higher, leaving OIS curves little changed and still embedding a gradual easing path over coming quarters. The weaker Business Confidence print and equity decline did not trigger any repricing in Banxico OIS, suggesting markets view the softening as insufficient to alter the next decision. With inflation data due shortly, the central bank retains maximum flexibility ahead of upcoming meetings. The stable short-term rate and absence of volatility spikes indicate that current data dependence remains the dominant framework rather than any immediate shift in the terminal rate outlook.

The Week Ahead

Attention centers on the upcoming Inflation Rate Month-over-Month and Inflation Rate Year-over-Year prints, both carrying medium impact and serving as the primary input for the next Banxico decision. A softer-than-expected outcome would reinforce the case for earlier easing in coming quarters, while a hotter print could push OIS pricing toward a more prolonged hold. No other high-impact Mexican data are scheduled, leaving room for USMCA renewal headlines and global commodity moves to influence flows. The inflation figures will also inform positioning ahead of the subsequent policy meeting, where the central bank is expected to maintain its data-dependent stance. Markets will monitor whether the softer confidence reading feeds into weaker household or corporate demand components within the inflation breakdown. Overall, the week’s releases carry direct implications for the pace of any future rate cuts rather than the direction of policy.

Risks & Themes

The weaker Business Confidence reading raises downside risks to 2H activity if the softening broadens into investment and hiring plans. USMCA renewal delays beyond the July milestone could reintroduce tariff uncertainty for auto and manufacturing exports, capping nearshoring gains. World Cup security logistics add a temporary layer of operational risk that may weigh on tourism-related services in the near term. On the upside, continued private investment in power generation and grid upgrades could ease blackout concerns and support manufacturing output. Markets appear to be underpricing the potential for inflation to reaccelerate if oil prices stabilize above recent lows, which would delay Banxico easing relative to current OIS levels. The combination of softer sentiment and stable rates suggests the balance of risks has tilted modestly toward caution without yet altering the base-case rate path.

Week in Review

Q1 GDP Rebound and Activity Prints Brazil’s Q1 GDP rebound, driven by household consumption and government transfers, set the tone for the week and raised questions about the durability of the growth impulse into the second half. Industrial production expanded more than expected, confirming manufacturing resilience after the prior reading and supporting export-linked revenues.

Services Momentum and External Flows In contrast, the S&P Global Services PMI declined, signaling cooling in the dominant services sector that accounts for the bulk of domestic demand. The trade surplus narrowed, missing consensus as imports remained firm despite resilient commodity shipments.

Market Pricing and External Pressures Equity markets sold off, with the Bovespa closing the week at 169,019 for a 1.85% weekly loss. USD/BRL rose 2.22% to 5.15, reflecting capital outflow concerns tied to proposed US tariffs on Brazilian goods. Vale shares fell 4.88% week-over-week while Petrobras shares rose. The data point to a mixed growth picture where the Q1 consumption surge has not yet translated into broad-based momentum, leaving fiscal and external risks in sharper relief.

BCB Watch

The Banco Central do Brasil left the Selic unchanged with COPOM minutes reiterating data dependence. BCB OIS pricing showed only modest shifts as inflation expectations remained elevated, reducing the probability of near-term easing. Industrial production strength and the services PMI decline together suggest the committee will continue to monitor the balance between activity resilience and cooling services momentum ahead of upcoming decisions. The real’s depreciation added a layer of imported inflation risk that reinforced the hold stance. Markets therefore price a prolonged plateau rather than an imminent cut, consistent with the inflation path observed in prior months.

The Week Ahead

Inflation prints will provide the first fresh gauge of price pressures. Business Confidence Index data will test whether the Q1 rebound has translated into sustained optimism or whether tariff uncertainty is weighing on forward expectations. These releases matter directly for the Banco Central do Brasil rate path because they will inform whether the current Selic level remains appropriate or whether incoming quarters require adjustment. A hotter inflation print would likely keep OIS curves anchored for an extended hold, while softer figures could reopen modest cut probabilities later in the cycle. Capital flow data and any Finance Ministry commentary on trade diversification will also influence sentiment ahead of the next meeting. Overall, the week’s focus remains on confirming whether the growth impulse persists without reigniting price pressures.

Risks & Themes

The US tariff proposal introduces downside risk to export revenues and capital flows that markets appear to be under-pricing relative to the real’s recent moves. Upside scenarios hinge on sustained industrial production momentum and commodity price support, which could delay any easing cycle if inflation reaccelerates. Downside scenarios center on further services PMI weakness and fiscal slippage that could pressure the primary balance target. The data shift the outlook toward a longer Selic plateau, yet BCB OIS curves still embed limited terminal-rate adjustment, leaving room for repricing if inflation surprises to the upside. External tariff developments remain the dominant swing factor for the coming quarters.

Week in Review

Equity Market Reversal After Early Gains Argentine equities posted a net weekly decline as the MERVAL dropped 6.56%.

Peso Depreciation Reverses The official USD/ARS rate declined 4.88% over the week while EUR/ARS tracked higher by 0.80%.

Commodity Support Fades Brent crude ended the week 1.99% lower at 93.09 while soybean futures declined 15.93% to 61,855.06, trimming export revenue expectations. These external price moves outweighed the absence of domestic data releases and left market direction dependent on global risk sentiment.

Reserve Accumulation Provides Buffer BCRA reserves rose on the back of soybean export proceeds, narrowing the gap between official and parallel exchange rates and reducing immediate balance-of-payments pressure. The quiet calendar with zero INDEC or BCRA releases left these external factors as the dominant drivers of asset prices.

BCRA Watch

The BCRA published weekly monetary aggregates and reserve data mid-week without altering the policy-rate corridor, consistent with ongoing fiscal consolidation. OIS curves showed no material repricing of near-term easing probabilities, reflecting the absence of inflation surprises or growth shocks. Reserve gains reinforced the view that the current stance can be maintained into the next meeting. Forward guidance from recent IMF Article IV discussions remained focused on primary surplus targets rather than rate adjustments. Market participants interpreted the stable BCRA OIS pricing as confirmation that external commodity volatility has not yet altered the expected path for coming quarters.

The Week Ahead

Attention will center on weekly BCRA monetary aggregates and reserve updates scheduled for mid-week, which will provide the first read on liquidity conditions after the recent peso move. Treasury auctions of Lecaps and dual-currency notes are expected to test demand for CER-linked paper and could influence local yield curves. Any updates on soybean export liquidations will be monitored for their direct impact on reserve accumulation and peso stability. Global prints including US ADP employment and ISM services data may shift risk sentiment toward emerging-market assets and indirectly affect BCRA reserve management. Markets will also watch parallel-market spreads for signs of renewed depreciation pressure ahead of upcoming decisions. These releases matter because they will inform whether the current rate path remains appropriate or requires recalibration in response to external volatility.

Risks & Themes

The week’s data suggest downside risks to growth have increased if commodity prices remain subdued, potentially delaying the investment recovery tied to import tariff reductions. Upside scenarios hinge on sustained primary surpluses and further reserve gains that could allow earlier measured easing. Markets appear to be underpricing the persistence of peso moves, as evidenced by the weekly decline in USD/ARS without corresponding BCRA intervention. External financing conditions remain sensitive to global dollar strength, leaving Argentine assets exposed to any reversal in the current oil-relief impulse observed in prior weeks.

Week in Review

Equity and Commodity Correlation Weakens Regional Assets MSCI Peru closed the week at 78.56 after an 8.52% decline while MSCI Chile ended at 38.62, down 5.92%, as copper fell 3.67% to 6.28 across the seven-day period. Commodity price sensitivity dominated equity performance.

FX Divergence Reflects Political and Terms-of-Trade Shifts USD/COP declined 2.33% to 3,593.41. In contrast, USD/CLP rose 2.6% to 912.7 and USD/PEN gained 2.09% to 3.47, tracking the 1.99% Brent decline to 93.09 and the 2.46% gold drop to 4,365.3.

Inflation Print Alters Colombia Policy Expectations Colombian inflation data introduced a domestic impulse absent in Chile and Peru. No activity or inflation releases occurred in Chile or Peru, leaving commodity prices as the sole driver of sentiment.

Absence of Data Releases Leaves Markets Commodity-Dependent The economic calendar contained zero releases across the three countries, forcing price action to respond to external flows. Brent and gold swings influenced external balance and fiscal narratives without offsetting local prints.

Political Premium Compresses Colombian Asset Volatility Market focus remained on fiscal signals. Equity performance diverged across the region in line with commodity exposure.

Andean Central Banks Watch

BanRep, BCCh and BCRP all stayed on hold with Chile’s short-term rate fixed at 4.50%. The Colombian inflation acceleration raises the probability that BanRep will keep its terminal rate higher for longer. BCCh and BCRP face no immediate data challenge; copper’s 3.67% weekly decline and gold’s 2.46% drop instead reinforce the case for unchanged policy into the next meetings. OIS curves showed minimal repricing, with markets continuing to embed on-hold paths for all three central banks. The week’s commodity weakness supplies additional disinflationary impulse that supports the current stance without prompting hawkish shifts in forward guidance.

The Week Ahead

Attention turns to any follow-up inflation or activity prints that could inform the next BanRep, BCCh and BCRP decisions. Copper and gold price stability will remain the dominant transmission channel for Chile and Peru external balances ahead of upcoming meetings. Colombian markets will track fiscal and policy signals that could alter BanRep’s inflation outlook over coming quarters. Brent movements around 93.09 will continue to shape fiscal revenue expectations and USD/COP volatility. Regional central banks are expected to maintain data dependence, with OIS pricing likely to stay anchored absent surprises in the next inflation releases. External demand indicators from major trading partners will influence the growth component of rate-path assessments. Any sustained commodity recovery could modestly reopen room for earlier easing at BCCh and BCRP relative to BanRep.

Risks & Themes

The week’s equity declines of 5.92% and 8.52% in Chile and Peru highlight downside risk if copper remains below 6.28, potentially widening fiscal gaps and delaying any future rate-cut discussions. Colombian inflation upside introduces the opposite risk for BanRep, where faster price momentum could force markets to reprice a longer hold than currently embedded in OIS. Political transition uncertainty in Colombia could produce further USD/COP swings that offset the 2.33% appreciation recorded this week. Markets appear to underprice the joint impact of lower metals prices on Chile and Peru current accounts while over-weighting near-term relief from the Colombian election outcome. A sustained Brent decline below 93 would add downside pressure to Colombia’s fiscal accounts, widening the divergence in rate-path expectations across the three central banks.

Week in Review

Housing data signals demand weakness. House prices fell month-over-month in May, missing consensus and reversing the prior gain, while the year-over-year rate slowed. Mortgage approvals rose against forecast, yet net mortgage lending dropped sharply. Consumer credit expanded slightly above expectation. These prints reinforced views that consumer demand remains subdued.

BoE speakers maintain hawkish tone. Governor Bailey flagged public-sector pay risks and reiterated expectations for rate cuts in 2025, while MPC member Greene highlighted inflation risks. The combined messaging lifted 10-year gilt yields and supported a data-dependent stance without immediate easing signals. Markets interpreted the comments as tolerance for inflation above target to avoid further growth weakness.

Equity and currency markets diverge. The FTSE 100 closed at 10368.1 for a net +0.28% weekly gain, while the FTSE 250 declined 0.80% to 23060.7. Sterling posted net losses, with GBP/USD slipping to 1.33. Brent crude ended at 93.09. The configuration reflected selective equity resilience amid softer housing metrics and broader dollar strength.

Labour-market and inflation backdrop persists. UK CPI remained elevated year-over-year while unemployment stood higher, creating a mixed policy environment. Manufacturers raised prices at a faster pace according to PMI surveys. OECD forecasts placed UK expansion below trend for 2026, underscoring demographic and productivity headwinds.

BoE Watch

Governor Bailey and MPC member Greene both spoke during the week, reiterating data dependence without altering the Bank Rate stance. Bailey flagged public-sector pay risks and tolerance for above-target inflation to support weak growth. Greene’s remarks focused on inflation risks and digital money considerations. The speeches reinforced expectations for rate cuts in 2025 while trimming near-term easing probabilities priced in BoE OIS curves. Mortgage and housing data showing cooling demand add downside risks to growth but keep the medium-term path anchored around gradual normalisation. No policy decision occurred this week, leaving forward guidance centred on incoming prints. The combination supports a cautious hold with limited room for aggressive cuts.

Data Review

House prices printed below consensus and the prior reading, with the annual rate lower. Mortgage approvals beat forecasts, yet net mortgage lending declined. Consumer credit rose modestly above consensus. These housing and credit figures point to cooling demand and tighter conditions. The data reinforce a mid-expansion cycle with disinflationary impulses, yet underlying price pressures remain evident. Labour-market softening supports the case for eventual easing, but the BoE’s data-dependent stance limits near-term cut probabilities. Pipeline pressures from manufacturer price rises add caution to the inflation outlook. Overall, the releases tilt the growth assessment lower while keeping the medium-term rate path anchored around gradual cuts.

The Week Ahead

BRC Retail Sales Monitor year-over-year releases offer an early read on consumer spending resilience. RICS House Price Balance follows and will test whether the Nationwide weakness extends. High-impact GDP month-over-month data arrive alongside the 3-month average and goods trade balance. Industrial production and manufacturing production figures will accompany the GDP release. BoE speakers will provide further guidance. Markets will watch whether the housing slowdown feeds into weaker activity prints and shifts BoE OIS pricing. The releases matter for confirming the cycle position amid persistent inflation.

Risks & Themes

Softer housing data shift the outlook toward downside growth risks while inflation limits aggressive easing. Upside scenarios include resilient retail sales that could support sterling and delay cuts. Downside scenarios centre on a GDP contraction that widens the output gap and accelerates BoE OIS cut pricing. Market mispricing appears in the 10-year yield level, which embeds fewer near-term cuts than warranted by the mortgage lending collapse. Volatility may rise around the GDP release given the unemployment backdrop. Positioning shows selective equity support for large caps but broader caution in sterling. Flow considerations favour gilt steepening if construction PMI remains weak.

Cross-Asset

The FTSE 100 advanced 0.28% to close at 10368.1 while the FTSE 250 fell 0.80% to 23060.7, reflecting relative large-cap resilience. UK 10-year gilt yields rose as investors pared rate-cut expectations following the housing data and BoE speeches. GBP/USD declined 0.85% to 1.33 and GBP/EUR gained 0.25% to 1.16, showing mixed sterling performance against a firmer dollar. Brent crude fell 1.99% to 93.09, while gold dropped 2.46% to 4365.3. The configuration links softer domestic housing prints to higher yields and selective equity outperformance.

Global Context

Lower Brent crude at 93.09 provided a disinflationary impulse for the UK as a net importer. DXY strength contributed to the GBP/USD decline. Euro-area Bund yields moved higher even as energy relief eased imported inflation pressure. The configuration mirrors selective DM outcomes where lower oil prices act as a buffer for central banks to remain on hold. Trade dynamics remain stable with no major tariff shifts. Geopolitical risks around energy supply continue to influence Brent volatility.

Week in Review

Equity Performance Split by Domestic Drivers Nordic equities finished the week with modest net moves. OMX Stockholm 30 closed at 3116.4 for a 0.71% gain while OMX Helsinki 25 rose 0.14% to 6471.52. In contrast, Oslo Bors declined 0.27% to 2003.92 and OMX Copenhagen 25 fell 0.38% to 1756.77. The pattern aligns with selective buying in rate-sensitive names offset by energy and pharmaceutical exposure elsewhere.

Currency Weakness Dominates FX Moves The Swedish krona and Norwegian krone both depreciated against the dollar and euro. USD/SEK rose 2.32% to 9.45 while EUR/SEK advanced 1.3% to 10.9. USD/NOK climbed 2.29% to 9.45 and EUR/NOK gained 1.26% to 10.9. The moves occurred against a backdrop of unchanged Norges Bank daily NOK purchases and Riksbank certificate operations that left liquidity conditions stable. Brent crude ended at 93.09 after a 1.99% weekly decline, removing some support from the krone.

Fixed-Income and Commodity Context Sweden and Norway 10-year yields held steady. Gold fell 2.46% to 4365.3 while Bitcoin dropped 16.12% to 61715.98. The absence of scheduled releases across Sweden, Norway, Denmark, and Finland left markets focused on external drivers. Overall activity data remained light, reinforcing the view that domestic demand continues to absorb external volatility without immediate contraction signals.

Nordic Central Banks Watch

Riksbank speakers maintained a data-dependent stance that left OIS pricing for the next meeting largely unchanged. Norges Bank kept its NOK purchase program steady and offered no fresh forward guidance. Danmarks Nationalbank faced continued pressure on the krone within the ERM II band, with the currency testing lows against the euro and requiring ongoing intervention support. Bank of Finland commentary aligned with ECB deposit-rate expectations, showing no deviation from the broader euro-area path. The week’s SEK and NOK softening did not materially shift market-implied rate trajectories, leaving both central banks positioned for hold decisions at upcoming meetings.

The Week Ahead

Next week’s calendar remains sparse, with Denmark retail sales and Finland trade data expected to provide the first domestic prints. Markets will assess whether these figures alter growth assessments ahead of the next Riksbank and Norges Bank decisions. Brent crude movements around the 93.09 level will continue to influence NOK flows and fiscal-rule calculations for Norway. Any ECB speakers will be watched for signals on the deposit-rate path that directly affects Finland and Denmark. OIS curves are likely to stay anchored until fresh inflation or activity data emerge in coming weeks. FX volatility in USD/SEK near 9.45 may prompt further commentary from Riksbank officials on krona implications for imported inflation. Overall, the data dependence theme established this week is expected to persist into the following period.

Risks & Themes

The week’s currency depreciation raises the possibility that imported inflation could reappear faster than current OIS pricing reflects, particularly if Brent rebounds from 93.09. Equity outperformance in Stockholm versus Oslo highlights a growth divergence that could widen if euro-area demand softens further. Upside risks center on stronger-than-expected retail sales in Denmark supporting Danmarks Nationalbank’s peg defense. Downside scenarios include additional risk-off moves pressuring Nordic high-beta assets. Markets appear to underprice the persistence of SEK weakness given the Riksbank’s unchanged hold bias. The broader reflationary tilt remains intact but could shift if next week’s limited releases surprise to the upside on prices.

Week in Review

Turkey growth momentum fades. Turkey Q1 GDP missed consensus, highlighting sequential softening in the largest non-EU economy in the region. The print aligned with lower energy import costs and reduced domestic demand pressures visible in prior trade data. Markets absorbed the miss without sharp FX moves as USD/TRY edged higher over the week.

Poland policy stability persists. The NBP left the benchmark rate unchanged, matching consensus and extending the hold into a third consecutive meeting. EBRD revised its Poland growth forecast lower citing external demand risks, yet domestic resilience remained evident in retail sales outperformance and continued EU Recovery and Resilience Facility inflows. Polish equities underperformed the region with iShares Poland declining 2.87% wow to 38.90.

Regional yields and FX show divergence. Hungary 10-year yields fell on local currency strength and EU cohesion fund progress, while Poland 10-year yields stayed steady. EUR/HUF rose 0.33% to 354.73 and EUR/CZK declined 0.53% to 24.14, reflecting modest portfolio rebalancing across the four EU members. Brent crude closed at 93.09 after a 1.99% weekly decline, easing imported inflation pressure for net importers.

Cross-border flows remain contained. Bitcoin fell 16.12% wow to 61715.98, amplifying risk-off sentiment that weighed on BIST 100. Gold declined 2.46% to 4365.3, consistent with lower oil prices and stable regional policy rates. Overall, the week reinforced a narrative of resilient but uneven expansion across Poland, Czech Republic, Hungary and Romania offset by Turkey’s clearer cooling signal.

Emerging Europe Central Banks Watch

NBP maintained the policy rate, extending the hold into a third straight meeting and leaving OIS curves little changed. Governor Glapinski’s post-decision commentary emphasized data dependence without signaling imminent easing despite the EBRD growth downgrade. No rate decisions or minutes were released by CNB, MNB or BNR during the week.

CBRT faces an unchanged policy rate ahead of the next meeting, with the Q1 GDP slowdown reinforcing the view that inflation may have peaked. The prior y/y print and upcoming inflation release will shape forward guidance. Regional OIS pricing continues to embed a later and shallower easing cycle for the EU-4 central banks relative to CBRT, supported by lower Brent levels at 93.09.

Data Review

Turkey’s Q1 GDP release delivered the clearest high-impact surprise, missing consensus and highlighting sequential slowdown. The print points to fading consumption momentum after earlier fiscal support, consistent with prior narrowing foreign trade surplus. No comparable GDP prints emerged from Poland, Czech Republic, Hungary or Romania, leaving the Turkish data as the dominant cycle indicator for the group.

NBP’s decision to hold produced no deviation from market expectations and left OIS curves pricing limited near-term easing. The EBRD’s downgrade of Poland growth reflected external euro-area demand weakness rather than domestic contraction. Hungary’s Q1 consumption-driven momentum and Romania’s steady euro timeline remained supportive of mid-cycle stability.

Inflation and unemployment releases scheduled for Turkey carried forward prior prints, with markets watching for any reacceleration that could alter CBRT timing. The absence of new CPI or labor data from the EU-4 economies kept focus on the disinflationary impulse from Brent’s 1.99% decline to 93.09. Overall, the data flow supports a continued hold bias for NBP, CNB and MNB while CBRT faces a more data-dependent path amid slower growth.

The Week Ahead

Turkey Industrial Production is scheduled for next week, following the prior reading and expected to influence CBRT deliberations. The TCMB Interest Rate Decision carries medium impact with markets parsing any shift in inflation language after the GDP miss.

No high-impact releases are listed for Poland, Czech Republic, Hungary or Romania. Central bank speakers from NBP and CNB may provide additional color on the hold bias. The Turkish unemployment print will feed into next week’s inflation narrative. Markets will monitor any ECB signals that could affect regional FX flows, particularly EUR/HUF at 354.73.

Risks & Themes

The Turkish GDP miss raises downside risks to growth forecasts and could delay CBRT easing if inflation reaccelerates above the prior level. Hungary’s yield drop signals potential positioning for further forint strength, yet EU funding delays remain a key upside scenario for regional bonds. Poland’s equity decline highlights sensitivity to external demand revisions such as the EBRD forecast.

Volatility in Bitcoin, which fell 16.12% wow, could spill into BIST 100 flows if risk sentiment deteriorates further. Mispricing appears limited in NBP OIS, which correctly anticipated the hold, while CBRT curves may underprice the growth slowdown impact. Net importer status across the group benefits from Brent at 93.09, but any reversal in energy prices would pressure inflation paths.

Cross-Asset

Equities closed mixed with BIST 100 ending at 13694.2 after a weekly decline of 0.07%. iShares Poland fell 2.87% wow to 38.90, underperforming on the EBRD forecast revision. Bonds saw Hungary 10-year yields drop while Poland 10-year yields remained steady, steepening the regional spread.

FX markets stayed range-bound as EUR/PLN rose 0.2% to 4.24, EUR/HUF gained 0.33% to 354.73 and EUR/CZK declined 0.53% to 24.14. USD/TRY advanced 0.37% to 46.07, reflecting limited reaction to the Turkish GDP miss. Commodities provided a disinflationary backdrop with Brent crude falling 1.99% to 93.09 and gold declining 2.46% to 4365.3.

Global Context

Brent crude’s 1.99% decline to 93.09 over the past seven days eased imported inflation pressure for the net-energy-importing economies in the group. Gold’s 2.46% drop to 4365.3 aligned with lower energy prices and stable DM yields. No major geopolitical events in the last seven days altered trade dynamics or cross-border capital flows into Poland or Hungary.

The prior week’s oil-relief narrative continued to support disinflation without triggering contraction signals in the limited activity data released. Regional equity underperformance relative to global indices reflected idiosyncratic growth forecast revisions rather than synchronized external shocks.

Week in Review

Business Sentiment Deteriorates Sharply Business confidence declined, underscoring weaker corporate optimism. The drop aligned with ongoing electricity constraints and elevated borrowing costs that continued to weigh on private-sector investment plans.

Equity and Currency Markets Diverge JSE Top 40 closed the period at 103419.5 after a 0.72% weekly decline, with Naspers providing partial offset through a 5.3% gain to 88300.0. USD/ZAR advanced 2.0% to 16.55, trimming earlier rand strength and reflecting modest capital outflow pressure amid thin liquidity.

Commodity Complex Weighs on Terms of Trade Platinum fell 6.48% to 1797.9 and gold declined 2.46% to 4365.3, while Brent crude eased 1.99% to 93.09. These moves reduced near-term support for mining equities and added downside risk to export revenues.

Bond Market Prices Slower Growth Long-term government yields declined even as short-term rates stayed unchanged, indicating fixed-income investors are embedding weaker activity rather than imminent policy easing. The data therefore point to a domestic growth outlook that is softening faster than external commodity relief can offset.

Policy Stance Remains Data Dependent No SARB speakers or MPC decisions occurred, leaving the repo rate unchanged and OIS curves little altered. Persistent high real rates continue to constrain household credit growth without yet producing outright contraction in high-frequency indicators.

External Rating Upgrade Provides Counterbalance A sovereign rating upgrade cited stronger fiscal discipline and lower-than-expected debt, offering a modest positive offset to the domestic confidence print.

Social Tensions Add Uncertainty Reports of anti-migrant violence raised medium-term risks to labour supply in key sectors without immediate market reaction.

Overall Narrative Arc The week combined a sharp domestic sentiment deterioration with external commodity weakness and a sovereign rating improvement, leaving the growth-inflation mix tilted toward slower activity ahead of the next SARB decision.

SARB Watch

The SARB maintained the repo rate unchanged with no speakers on the calendar, keeping forward guidance focused on data dependence. Softer business confidence reinforced the case for an extended hold by highlighting downside risks to private demand. Long-term yields easing suggest markets are already pricing slower growth rather than near-term cuts. SARB OIS curves showed minimal movement, with pricing still embedding limited easing through the next meeting. The combination of softer sentiment and stable inflation supports a cautious stance that delays any shift in the rate path until clearer activity signals emerge.

The Week Ahead

GDP Growth Quarter-over-Quarter and GDP Growth Year-over-Year prints will provide the first hard read on Q2 momentum after the confidence slump. Consensus expectations remain modest, with any downside surprise likely to reinforce expectations for a prolonged SARB hold. Markets will assess whether the data confirm the reflationary tilt seen in prior commodity relief or instead highlight domestic demand weakness. The releases matter directly for the rate path because they feed into the SARB’s assessment of the output gap ahead of upcoming decisions. No other high-impact domestic indicators are scheduled, leaving global commodity prices and USD/ZAR as the main external drivers. Any firmer-than-expected GDP outcome could trim cut probabilities priced into SARB OIS, while a miss would likely extend the hold narrative into coming quarters.

Risks & Themes

The sharp confidence drop raises the probability of a more pronounced growth slowdown than currently embedded in SARB OIS pricing. Upside risks centre on the rating upgrade anchoring investor flows and supporting rand stability if global risk sentiment improves. Downside scenarios include further commodity weakness widening the current-account gap and amplifying imported inflation pressure from any Brent rebound. Markets appear to be under-pricing the persistence of electricity and structural constraints that could keep the SARB on hold longer than the next meeting, even as lower oil prices provide a temporary disinflationary buffer.

Week in Review

GDP slowdown confirms cooling momentum. Australian Q1 GDP missed consensus, reinforcing earlier building permits weakness and company gross profits contraction.

Policy divergence widened across the Tasman. RBNZ hawkish comments contrasted with the RBA hold. This split produced AUD/NZD closing the week at 1.22.

Commodity and equity markets reflected mixed signals. ASX 200 finished at 8625.1 for a 1.19% weekly decline, with BHP at 61.24. Brent crude eased to 93.09 while gold fell to 4365.3, limiting support for AUD/USD which closed at 0.7.

Housing and confidence indicators pointed to further softening. Westpac Consumer Confidence Index and NAB Business Confidence Index remained weak, consistent with RBA remarks that rate hikes are cooling the housing market without recession risk.

External balances provided a modest offset. The trade surplus beat consensus, highlighting resilient commodity export volumes even as domestic demand indicators weakened.

Cross rates captured the RBNZ-RBA gap. NZD/USD declined to 0.58 for a 3.09% weekly move while AUD/USD fell 1.82% over the same period, underscoring relative outperformance of the kiwi on policy expectations.

Inflation persistence language from RBA speakers shaped market pricing. RBA speakers stressed ongoing price pressures, leaving OIS curves pricing a later first cut than markets had anticipated before the GDP release.

Activity surveys reinforced the growth narrative. The Ai Group Industry Index deteriorated, extending the sequence of weak reads.

Overall arc showed data dependence dominating. Markets absorbed the GDP miss and RBA hold without aggressive repricing, while RBNZ hawkishness provided the clearest single impulse for NZD outperformance versus the AUD.

ANZ Central Banks Watch

RBA speakers reiterated that the cash rate remains appropriate given inflation persistence, with no signals of near-term easing despite the GDP print. RBNZ comments on earlier and steeper hikes lifted the NZ short-term rate and shifted OIS pricing toward a higher terminal rate for New Zealand relative to Australia. Markets responded by trimming RBA cut probabilities for the next meeting while maintaining a modest hawkish tilt in RBNZ OIS curves. The data flow reinforced the RBA’s data-dependent stance without altering the anchor. Forward guidance is expected to echo the same caution on housing cooling and inflation risks.

The Week Ahead

Westpac Consumer Confidence and NAB Business Confidence releases will provide the first read on sentiment after the soft GDP outcome. Business NZ PMI offers the main New Zealand data point and will be watched for any confirmation of the RBNZ’s tighter policy path. These releases matter because they feed directly into RBA and RBNZ assessments of domestic demand ahead of upcoming decisions. Traders will also monitor any follow-up speeches for shifts in forward guidance on the rate path. Consensus expectations point to continued weakness in confidence metrics that could further delay RBA easing while supporting RBNZ hawkishness. The combination should keep AUD/NZD sensitive to relative OIS moves through the period.

Risks & Themes

Downside growth risks have increased after the GDP miss, raising the possibility that RBA pause bets extend further if subsequent confidence prints disappoint. Upside inflation surprises remain the key threat to both central banks, particularly if commodity prices rebound from Brent at 93.09 and push imported pressures higher. Markets appear to be underpricing the persistence of RBNZ hawkishness relative to the RBA, leaving NZD vulnerable to any dovish correction in OIS curves. Broader China demand uncertainty continues to weigh on iron-ore and LNG linkages, amplifying downside scenarios for Australian activity data in coming quarters.

Week in Review

Services data lift sentiment while equities diverge. Mainland markets opened the week higher before closing lower. RatingDog services PMI surprised higher, driving CSI 300 to an intraday peak. Yuan strength and policy signals support cross-border flows. USD/CNY eased to 6.76 as the currency hit its firmest basket level since 2022, coinciding with PBoC reference rates fixed near 6.82. Hong Kong’s Hang Seng rose before profit-taking pulled it back. Taiwan outperforms on tech demand. TAIEX advanced, supported by foreign buying in chip names, before closing the period lower. Copper and Brent crude declined. Property and external balances remain focal. State Council white-list expansions and incremental refinancing support failed to prevent mainland equity losses. The week closed with USD/HKD inside the peg at 7.83 and no HKMA intervention signals. Overall positioning reflected selective rotation toward Taiwan semiconductors and away from mainland property exposures.

Greater China Central Banks Watch

PBoC set daily USD/CNY reference rates near 6.82, reinforcing a stability bias without altering liquidity operations. No HKMA or CBC policy shifts were announced and aggregate balance data showed no peg pressure. The services PMI beat lowers the urgency for near-term easing while leaving OIS curves priced for gradual accommodation later in the quarter. Forward guidance remained data-dependent with no speakers altering the medium-term rate path. The yuan’s four-year high versus the basket reflects external balance improvement rather than active intervention. Overall the week’s data keep the PBoC, HKMA, and CBC on hold without immediate market pushback.

Data Review

NBS manufacturing PMI printed exactly at consensus while non-manufacturing rose above forecast, indicating stabilization rather than acceleration in activity. RatingDog manufacturing PMI eased yet still exceeded consensus, pointing to modest softening in export-oriented factories. The standout release was RatingDog services PMI, a beat versus expectation and the strongest reading in several months on new orders. These prints together suggest the domestic cycle remains in mid-expansion with services providing the clearest positive surprise. Export and import trends showed sequential improvement but were not updated this week. The services beat reduces near-term pressure on PBoC accommodation while leaving the medium-term rate path dependent on upcoming inflation and trade figures. Producer price trends continued to show contained upstream pressures consistent with lower energy prices. Overall the data reinforce a reflationary tilt layered on resilient underlying demand rather than a growth scare.

The Week Ahead

China trade balance, exports year-over-year, and imports year-over-year are scheduled for release with consensus expectations of expansion. Inflation rate year-over-year and month-over-month prints follow alongside producer price index year-over-year. These releases will update the growth and disinflation outlook ahead of the next policy window. PBoC 7-day reverse-repo operations and any MLF top-ups remain in focus daily. No rate decisions are expected from HKMA or CBC. Semiconductor export trends and foreign flows into Taiwan equities will continue to influence TAIEX. Markets will also monitor any State Council comments on special-bond quotas.

Risks & Themes

The services beat shifts the outlook toward firmer domestic demand and reduces downside growth risks for the quarter. Upside scenarios include sustained yuan appreciation supporting import margins while downside scenarios center on weaker-than-expected trade data reigniting stimulus calls. Market mispricing appears limited given the alignment between PMI beats and equity rotation into Taiwan. Volatility remains contained with Bitcoin’s weekly drop the clearest outlier. Positioning shows continued foreign inflows into semiconductor names and reduced exposure to mainland property. Flow considerations favor selective long-Taiwan, neutral-yuan stances into next week’s inflation prints.

Cross-Asset

Equities closed the week with Shanghai Composite at 4027.74 (-0.74%), CSI 300 at 4816.92 (-0.56%), Hang Seng at 24961.95 (-1.72%), and TAIEX at 45070.94 (-0.59%). FX saw USD/CNY finish at 6.76 after a net weekly change of -0.02 while USD/HKD held at 7.83. Commodities recorded copper at 6.28 (-3.67%), Brent crude at 93.09 (-1.99%), and gold at 4365.30 (-2.46%). Bitcoin fell 16.12% to 61720.00. The stronger yuan coincided with equity rotation toward Taiwan while commodity weakness reflected mixed China demand signals. Bond markets showed limited movement with no new 2-year or 10-year yield prints released.

Global Context

Lower Brent crude prices over the past seven days eased imported inflation pressure for net importers including China. US-China trade scrutiny signals from Washington added modest external-financing caution for export-oriented sectors. China-New Zealand bilateral trade talks in Beijing reinforced regional cooperation without immediate tariff changes. Broader dollar stability supported the yuan’s basket strength. Geopolitical risks remained low with no fresh cross-strait developments reported in the last seven days.

Week in Review

Equities declined across the board. KOSPI closed at 8160.59, down 7.14% on the week, while KOSDAQ ended at 1002.44, down 4.53%. Samsung closed at 329000 after a 5.73% decline and SK Hynix closed at 2070000 after a 12.4% decline.

Currency depreciation accelerated. USD/KRW advanced 3.46% to close at 1559.0, widening the weekly move relative to regional peers and prompting Ministry statements on speculative trading.

Brent crude edged lower. Brent crude settled at 93.09, down 1.99% on the week.

BoK Watch

The combination of equity weakness and won depreciation reinforces a data-dependent policy stance. Officials signaled readiness to address excessive moves in USD/KRW near current levels. The rate path remains skewed toward an extended hold.

The Week Ahead

Markets will monitor daily semiconductor futures and Brent crude around 93.09 for signals on export momentum and imported inflation. Any further official commentary on won stabilization could trigger intraday USD/KRW volatility. Positioning will reflect whether external demand resilience offsets the recent currency move.

Risks & Themes

The 7.14% KOSPI decline and 3.46% won depreciation highlight reassessment of external and domestic drivers. Upside risks center on sustained chip demand supporting factory activity. Downside scenarios include further USD/KRW pressure that could prompt additional intervention. Currency volatility remains the dominant near-term market risk.

Week in Review

Rupiah and external balance stress dominate Indonesia data delivered the clearest negative surprise of the week. May inflation and the trade surplus prints coincided with USD/IDR reaching 18,035, a fresh record, and prompted Bank Indonesia to tighten dollar-purchase rules and reaffirm direct intervention. The JCI fell 9.7% over the seven days to 5,594.77, its steepest weekly decline in the period.

Equity market rotation within ASEAN Thailand’s SET index posted only a 0.34% weekly decline to 1,582.60 after the Bank of Thailand signaled new BNPL curbs. Malaysia’s KLCI advanced 0.62% to 1,693.43. The Philippines PSEi gained 2.4% to 5,938.38, while Singapore’s STI eased 0.93% to 5,049.96. These moves reflected selective positioning ahead of the Philippines May inflation release rather than broad regional risk-on sentiment.

Commodity price relief versus currency pressure Brent crude declined 1.99% to 93.09, providing a modest disinflationary buffer for the region’s net importers. Gold fell 2.46% to 4,365.30 and Bitcoin dropped 16.11% to 61,727.07, illustrating broader de-risking. USD/MYR rose 1.44% to 4.03 and USD/SGD gained 1.02% to 1.29, showing that even non-Indonesian currencies faced USD strength despite softer energy prices.

Policy response and market pricing Bank Indonesia coordinated with the finance ministry to boost asset yields in support of the rupiah. No other central bank in the six economies adjusted policy or issued new forward guidance. OIS curves across BI, BSP and MAS showed only marginal shifts, consistent with the data-dependent stance reiterated by regional authorities in prior weeks.

Through-line across the seven days The dominant narrative was Indonesia-specific external vulnerability layered on resilient but uneven ASEAN equity performance. Lower Brent prices failed to offset capital-flow pressure on the rupiah, while neighboring markets absorbed the same global factors with smaller moves. The week therefore reinforced differentiation within ASEAN rather than synchronized regional momentum.

ASEAN Central Banks Watch

Bank Indonesia escalated FX support measures after the rupiah breach of 18,000, including tighter dollar-purchase rules and joint statements with fiscal authorities on yield support. No rate decision or minutes were released by BI, BoT, BNM, BSP, MAS or SBV. Thailand’s BoT governor restated the 2% GDP and 3% inflation forecasts without altering the expected hold path. Philippines inflation data due this week will feed directly into BSP OIS repricing, while Singapore’s upcoming external trade print offers the next read on MAS policy space. OIS curves showed only modest widening in near-term BI hike probabilities, leaving the overall ASEAN rate outlook anchored to data dependence rather than pre-emptive easing.

The Week Ahead

Philippines labor data will set the tone for BSP rate-path expectations, with any upside surprise likely to keep OIS curves biased toward a longer hold. Singapore external trade figures mid-week will test external demand resilience and inform MAS forward guidance. Indonesia’s 10-year benchmark bond auction will provide a direct gauge of rupiah stabilization efforts and any follow-through capital inflow response. Thailand cabinet discussions on tourism stimulus carry limited near-term rate implications but could support growth forecasts ahead of the next BoT meeting. No monetary policy decisions are scheduled across the six central banks, so markets will focus on data prints that either reinforce or challenge the current on-hold consensus. Vietnam and Malaysia data calendars remain light, leaving supply-chain and FDI flows as secondary themes. Overall, next week’s releases will refine rather than reset ASEAN rate expectations.

Risks & Themes

Persistent rupiah weakness raises downside scenarios for Indonesian importers and fiscal funding costs if intervention proves insufficient. Upside risks center on faster tourism recovery in Thailand and sustained electronics FDI inflows to Vietnam and Malaysia that could offset softer commodity exports. Markets appear to underprice the second-round inflation effects from a weaker regional currency basket, particularly if Brent stabilizes above 93. Markets also appear to discount the possibility of coordinated fiscal-monetary packages in Indonesia that could alter BI OIS pricing faster than current curves embed. The week’s equity divergence suggests investors are selectively rotating rather than broadly de-risking ASEAN, leaving room for further rotation if Philippines inflation surprises higher.

Week in Review

Industrial Production Surprise April industrial production expanded ahead of consensus while manufacturing output accelerated further. The beat reflected stronger domestic demand and lifted equities mid-week, with Nifty 50 easing to 23,366.7 by week-end.

GDP Outperformance and Policy Hold Q4 GDP growth and full-year FY26 expansion surpassed expectations, confirming the economy’s resilience. The Reserve Bank of India maintained the short-term policy rate, pairing the decision with measures expected to draw further inflows.

Market and External Price Moves Nifty 50 finished the week down 0.07% at 23,366.7 while Sensex declined 0.03% to 74,243.34; USD/INR eased 0.07% to 94.93. Brent crude fell 1.99% to 93.09 and gold dropped 2.46% to 4,365.3, reducing imported inflation pressure.

Services Momentum and Liquidity Signals Services PMI remained in expansion territory, supporting the view that services-led growth offset softer goods exports. Liquidity operations kept short-term rates anchored.

RBI Watch

The Reserve Bank of India held the short-term policy rate steady, maintaining its neutral stance while introducing inflow-focused measures. Forward guidance emphasized rupee stability and data dependence ahead of the next meeting. April IIP and Q4 GDP beats reinforced the view that underlying demand remains solid, limiting the need for near-term easing. OIS curves showed little change in pricing for the coming quarters, reflecting continued caution on imported inflation risks even as Brent crude declined to 93.09.

The Week Ahead

Inflation data will provide the first read on price pressures after the recent oil decline. Markets will assess whether the print supports the current neutral bias or opens scope for a shift at upcoming decisions. Services PMI follow-through and any updates on inflows will also be monitored for signs that growth momentum is broadening. The data will feed directly into assessments of the rate path.

Risks & Themes

Stronger-than-expected IIP and GDP prints reduce downside growth risks but leave the Reserve Bank of India exposed if oil rebounds and lifts imported inflation above target. The rupee’s stabilization at 94.93 after earlier weakness suggests markets may be underpricing the durability of inflow measures. Upside scenarios center on sustained services momentum, while downside risks include renewed supply shocks or weaker monsoon outcomes that could push food prices higher in coming quarters.

Week in Review

Inflation reacceleration confirmed Turkey's May inflation print showed a modest increase year-over-year from April, reversing the prior month's modest easing and confirming that disinflation remains uneven.

Equity and currency stability amid global oil relief BIST 100 posted a net weekly decline of 0.07% to close at 13694.2. USD/TRY rose 0.37% over the seven days to 46.07, while EUR/TRY fell 0.69% to 53.11, reflecting contained currency volatility alongside Brent crude's 1.99% weekly drop to 93.09.

Risk-asset repricing and external signals Bitcoin's 16.09% weekly decline to 61739.24 exerted no visible spillover onto Turkish assets, while gold priced in TRY fell 2.46% to 4365.3.

Data dependence ahead of policy meeting The week's limited domestic releases left the policy rate unchanged in the interim. Overall, the seven-day period reinforced a narrative of sticky price pressures.

CBRT Watch

The central bank maintained the policy rate through the week, with no speakers or minutes altering forward guidance ahead of the next decision. The May inflation outcome reinforces expectations that the bank will keep rates on hold at the next meeting to ensure further disinflation progress. OIS curves showed little movement, pricing a prolonged pause rather than near-term cuts or hikes. The data therefore supports a steady rate path through upcoming decisions, with the modest inflation reacceleration viewed as insufficient to shift the terminal rate outlook. External financing news provides a modest buffer that allows the bank to remain data-dependent without immediate market pressure.

The Week Ahead

The next Industrial Production release will provide the first activity signal since the May inflation print and will inform whether output momentum supports the current policy stance. Markets will then turn to the upcoming TCMB Interest Rate Decision. A steady outcome would keep OIS pricing anchored to an extended hold. The production data matter because stronger readings could reduce the urgency for future easing while weaker prints might reopen questions about growth risks in coming quarters. Overall, the releases will set the tone for how the central bank balances the inflation level against external financing support.

Risks & Themes

The May inflation increase introduces upside risk to the disinflation timeline, potentially delaying the first rate cut beyond what OIS curves currently embed. Credit concerns could widen spreads if regional tensions intensify, pressuring TRY beyond the modest weekly gain seen in USD/TRY. On the downside, further Brent declines would ease imported price pressures and support a faster return to target. External financing provides a positive offset, but any delay could leave fiscal and inflation risks more exposed in coming quarters.

Week in Review

Oil Price Reversal Dominates Brent crude closed at 93.09, a net 1.99% decline that reduced the implied fiscal buffer for Saudi Arabia, the UAE, and Kuwait. WTI followed a similar path, ending at 90.54 after a 1.76% weekly drop. The move left regional budget assumptions more dependent on OPEC+ compliance through the next meeting.

Equity Markets Absorb the Shift MSCI Saudi fell 1.63% to 37.44 while Saudi Aramco closed at 27.00, down 0.73% on the week. MSCI UAE declined 2.68% to 18.50 and MSCI Qatar eased 2.36% to 18.62, with the DFM General index posting a 0.12% loss. Daily turnover remained light, consistent with the holiday-shortened calendar.

IMF and Diversification Signals The IMF highlighted Saudi Arabia’s ability to maintain Vision 2030 momentum despite slower growth, noting that non-oil sectors continued to offset softer hydrocarbon receipts. The economy minister reiterated readiness for multiple oil-price outcomes, reinforcing the narrative of fiscal resilience.

FX Pegs and Cross-Asset Stability USD/SAR stayed at 3.75 and USD/AED at 3.67, confirming unchanged peg credibility. Gold fell 2.46% to 4365.30.

Data Calendar Remains Empty No CPI, GDP, or labor releases occurred across the six economies, leaving markets to price the oil move directly into fiscal and external-balance forecasts. The absence of surprises kept consensus expectations for 2026 growth anchored near prior levels.

Through-Line Across the Week The dominant arc was therefore one of contained volatility: the oil decline challenged revenue assumptions without triggering contraction signals or policy responses.

GCC Central Banks Watch

GCC central banks left policy rates on hold with no speakers or minutes altering forward guidance. OIS curves showed no material shift in the probability of near-term moves, consistent with the unchanged USD/SAR and USD/AED pegs. Lower Brent prints reduced imported-inflation pressure for net importers within the bloc, supporting the case for steady rates through the next meeting. High FX reserves and low debt ratios continued to anchor sovereign credit profiles, leaving the rate path dependent on cumulative oil revenue rather than domestic demand data.

The Week Ahead

Markets will track Brent and WTI daily closes for their direct read-through to fiscal balances ahead of the next OPEC+ JMMC gathering. Any sustained move away from current levels will update revenue assumptions used in upcoming budget revisions. Regional equity volumes are expected to remain subdued until clearer signals emerge on supply discipline. Sovereign CDS spreads should stay anchored absent fresh geopolitical headlines. Investors will also monitor follow-up comments from Saudi officials on diversification progress, which could influence long-term growth forecasts embedded in central-bank communications. The quiet data slate leaves oil and external demand as the primary variables for the rate outlook over coming quarters.

Risks & Themes

A further decline in Brent would pressure non-oil growth forecasts and widen the fiscal gap that Vision 2030 spending is intended to close. Conversely, renewed supply concerns could lift revenues faster than current OIS pricing reflects, reopening the possibility of earlier tightening signals. Equity underperformance relative to oil suggests markets are discounting some of the fiscal offset, a potential mispricing if diversification metrics continue to beat expectations. Geopolitical risk premia remain the dominant upside wildcard for energy prices and the dominant downside wildcard for regional risk assets.