Week in Review

Labor market shows resilience US data flow through July 2 confirmed selective strength in hiring demand even as manufacturing indicators softened. JOLTs job openings beat consensus and extended the prior month’s level. ADP private payrolls missed expectations on July 1, yet the broader employment picture stayed above recession thresholds. Manufacturing momentum fades Dallas Fed Manufacturing Index registered zero on June 29, below the prior reading, while ISM Manufacturing PMI declined on July 1. Chicago PMI contracted versus consensus, highlighting regional divergence within the factory sector. Case-Shiller home prices accelerated year-over-year against expectations, showing housing resilience despite elevated mortgage rates. Policy backdrop stays data-dependent Fed Chair Warsh comments on July 1 and July 2 signaled caution on inflation without altering the higher terminal rate path. Treasury yields rose across the curve, with the 10-year note closing higher on July 5 after a notable daily move on July 2. Equity markets absorbed the mixed prints with the S&P 500 finishing higher week-over-week. The narrative arc points to an expansion that remains intact but tilts financial conditions tighter through the rates channel rather than outright contraction signals. Markets therefore enter the July 6-10 window with clearer evidence that above-target inflation will continue to shape the Fed’s medium-term reaction function.

Fed Watch

Fed Chair Warsh comments at the ECB forum on July 1 and July 2 upheld institutional independence after the Supreme Court blocked removal attempts and downplayed near-term inflation risks. The remarks kept OIS curves anchored with the first cut still priced no earlier than mid-2027, consistent with the prior week’s repricing. Treasury market pricing reflected reduced odds of near-term easing given the unemployment rate and resilient JOLTs data. Warsh signals aligned with the FOMC’s data-dependent stance, leaving the fed funds rate path unchanged through the July 8 minutes release. Market participants interpreted the tone as consistent with tolerating above-target prints to support growth. The week’s labor resilience reinforced our base case that the Fed will maintain patience rather than signal imminent adjustment. Forward guidance therefore remains focused on incoming inflation and employment prints rather than calendar-based easing.

Data Review

The June 29 Dallas Fed Manufacturing Index at zero missed the prior reading and pointed to weaker regional factory conditions entering the holiday-shortened week. On June 30, JOLTs job openings beat consensus, confirming labor demand held above expectations and supporting the unemployment rate. Case-Shiller home prices rose year-over-year versus forecast, extending the prior pace and illustrating household balance-sheet strength. Chicago PMI dropped sharply versus consensus, while Conference Board consumer confidence edged higher. ADP employment change printed below estimate on July 1, yet the miss did not alter the broader cycle view given the JOLTs beat. ISM Manufacturing PMI slipped on July 1, with the employment sub-index improving modestly. API crude oil stocks declined versus the prior build, contributing to WTI crude’s decline on July 2. These releases collectively signal that domestic demand continues to absorb higher borrowing costs without immediate contraction, keeping the Fed’s rate path skewed toward patience. The data reinforce our view that the expansion sits in mid-cycle with selective resilience rather than synchronized slowdown.

The Week Ahead

Monday July 6 brings the Services Sector PMI at 10:00 a.m. ET with consensus after the prior reading, alongside Fed’s Waller speech at 11:00 a.m. Tuesday July 7 features ADP Employment Change Weekly at 8:15 a.m. and the trade balance at 8:30 a.m. with consensus at a deficit. Wednesday July 8 delivers FOMC Meeting Minutes at 2:00 p.m. ET, which will provide fresh color on the June decision and rate outlook. Thursday July 9 includes weekly jobless claims at 8:30 a.m. with consensus and a speech by Fed’s Williams at 9:00 a.m. Friday July 10 rounds out the calendar with any follow-through data or speaker remarks. These releases matter because they will test whether the labor resilience observed in JOLTs extends into services and claims data. Central bank speakers will likely reinforce the higher-for-longer message already embedded in OIS curves. Markets will watch for any deviation that could shift the mid-2027 cut timing.

Risks & Themes

This week’s JOLTs beat and manufacturing misses shift the outlook toward continued data dependence rather than accelerated easing. Upside scenario centers on further labor strength that could push terminal rate expectations even higher, while downside risks stem from sharper factory contraction feeding into employment. Market mispricing signals appear limited given the alignment between OIS curves and the unemployment rate. Volatility remains contained as foreign demand for US notes stays firm amid narrower rate differentials. Positioning shows equity investors favoring growth sectors ahead of the holiday period, with limited flows into duration. The combination leaves the expansion intact but tilts financial conditions tighter through the dollar and yields channels.

Cross-Asset

Equities posted a net gain with the S&P 500 closing at 7483.24 on July 5 after advancing on June 30 and July 1. Nasdaq 100 rose on June 30 before closing the week lower, reflecting tech-led rotation. Bonds saw the 10-year Treasury yield climb on July 5 from the prior close, with the 2-year note rising. FX markets showed USD/JPY easing while EUR/USD advanced. Commodities delivered mixed results as gold climbed on July 5 and WTI crude finished lower after a decline on July 2. Bitcoin gained week-over-week. Daily moves included the Nasdaq 100’s advance on July 1 alongside gold’s jump on July 2 as yields rose. The configuration reflects data-driven rotation into equities and gold amid firmer labor prints and softer manufacturing signals.

Global Context

US data resilience continues to anchor global cycle expectations, overriding earlier oil-price relief and re-anchoring policy paths higher across developed markets. Cross-border spillovers appear through the dollar channel as EUR/USD held near prior levels and USD/JPY near recent closes. Trade dynamics remain sensitive to tariff hearings involving Brazilian officials in Washington this week. Geopolitical risks tied to Middle East oil supply added to WTI crude volatility around recent levels. Only the last seven days show no material change in these external balances that would alter the US-centric narrative.

Week in Review

Inflation Disinflation Accelerates Across Core Economies Eurozone inflation prints delivered the clearest downside surprise of the week ending July 5. German June headline inflation undershot consensus while French inflation fell below expectations. Italian flash CPI eased and Spanish inflation held steady. The aggregate Eurozone reading confirmed the downtrend that began in prior weeks.

Labor Market Shows Resilience German unemployment remained unchanged with a modest decline in jobless claims, while Spanish business confidence improved. Retail sales data reinforced the picture, with German May figures rising month-over-month and year-over-year, both exceeding forecasts. These outcomes aligned with the selective resilience theme from the week of June 28, where regional divergence inside the single currency bloc persisted.

Market Pricing Reflects Data Dependence Equity and fixed-income markets responded with net gains. The combination left the expansion intact but tilted financial conditions through the euro channel rather than through outright contraction signals. Markets therefore enter the week of July 6 with clearer evidence that above-target inflation prints in the largest economies will continue to shape ECB rate paths into the second half of 2026.

ECB Watch

No ECB speakers or policy decisions occurred during the week ending July 5. The June inflation prints, however, directly inform the medium-term rate path, with the headline reading and core moderation across Germany and France likely to keep ECB OIS curves anchored for limited near-term adjustment. Market pricing after the data flow showed only modest repricing, consistent with the data-dependence stance observed across DM central banks in the prior three weeks.

The combination of cooling prices and resilient German retail sales supports the view that the ECB will tolerate above-target prints to underpin growth. Forward guidance therefore remains focused on incoming data rather than pre-committed easing steps.

Data Review

German June headline inflation undershot consensus and confirmed faster disinflation than markets had priced. French preliminary CPI fell below forecast and reinforced the same trend. Italian flash CPI eased while Spanish inflation held steady but rose month-over-month.

The aggregate Eurozone June reading therefore extended the downtrend observed across major member states. German retail sales posted a strong rebound month-over-month versus consensus and rose year-over-year, signaling consumer resilience that contrasts with earlier weakness. Unemployment data showed stability, with the German headline rate unchanged and a modest drop in claims. Spanish business confidence improved, adding a further positive note.

These prints collectively point to a euro-area economy that remains in mid-expansion with cooling price pressures, supporting a slower ECB easing trajectory than some OIS curves had previously implied. The data dependence theme from the week of June 21 remains intact, as above-target prints are tolerated to support growth.

The Week Ahead

Monday features German Factory Orders month-over-month, expected at 1.2% after a -3.8% prior reading. Tuesday brings German Industrial Production month-over-month, consensus 0.2% versus 0.4% previously, alongside the French Trade Balance. Wednesday includes German Trade Balance and Exports month-over-month data.

Thursday highlights Italian Industrial Production month-over-month, consensus 0.1% after 0.5%. Markets will parse these releases for confirmation that the mid-expansion remains intact and for any implications on the ECB deposit rate trajectory. No high-impact central bank speakers are scheduled, leaving the data flow as the dominant driver for Bund yields and EUR crosses.

Risks & Themes

The week’s inflation undershoots reduce downside risks to the growth outlook but leave upside risks to terminal rates if activity data continue to surprise positively. Positioning in OIS markets appears light on further near-term ECB easing after the June prints, creating potential for volatility if German Factory Orders or Industrial Production beat expectations. Flow considerations favor selective equity exposure given the DAX outperformance, while any renewed dollar strength could tighten euro-area financial conditions through the currency channel.

Cross-Asset

Euro Stoxx 50 closed the week at 7483.24, up 0.58% week-over-week, while DAX advanced 2.91% to 6412.68 and CAC 40 rose 4.68% to 25779.31. Daily moves included a Euro Stoxx 50 gain on July 1 after the soft French and German inflation prints and a DAX advance on July 2. German 10-year Bund yields climbed over the period.

EUR/GBP held at 1.14 with a net 0.42% weekly gain, while EUR/JPY rose 1.16% to 1.33. The configuration reflects equity outperformance on disinflation news offset by modest yield increases and contained euro moves.

Global Context

US data resilience from the week of June 28 continues to anchor global cycle expectations and reprice policy paths higher across developed markets. This dynamic exerts modest upward pressure on the euro through the dollar channel, even as euro-area disinflation proceeds. Trade and geopolitical spillovers remain contained within the last seven days, with no material shifts in external demand or commodity prices affecting the euro-area outlook.

Week in Review

Yen and intervention dynamics The yen extended its multi-decade weakness through the week, with USD/JPY settling at 161.33. Equity markets reflected the tension, as the Nikkei 225 closed the week at 69,744.07, up 0.4 percent on a Friday-to-Friday basis.

Data flow and sentiment signals Domestic data delivered mixed signals on corporate and household sectors. These prints together left the growth picture intact but highlighted uneven momentum across manufacturing and household sectors.

Yield and policy repricing The 10-year JGB yield moved higher over the period, while the 2-year yield remained anchored. Brent Crude declined, adding modest external disinflation pressure that markets judged insufficient to alter the BoJ’s gradual exit path. Bitcoin rose, illustrating selective risk appetite even as yen-driven import costs stayed elevated.

BoJ Watch

The Bank of Japan received further confirmation that corporate sentiment has improved in the April-June quarter, supporting the case for additional normalisation at upcoming decisions. BoJ OIS curves shifted modestly higher in response to the 10-year yield increase, pricing a greater probability of further adjustment over the coming quarters. Persistent USD/JPY levels above 161 kept intervention risk in focus, with officials appearing to target speculators rather than broad directional moves. The combination of stable unemployment and softer industrial production data reinforced the view that domestic demand remains sufficient to tolerate measured rate increases. No speakers or minutes altered forward guidance during the week, leaving the policy path dependent on incoming inflation and wage signals. Overall, the data flow sustained the gradual tightening bias without prompting an immediate repricing of near-term meeting outcomes.

The Week Ahead

Household Spending releases will provide the first read on consumer resilience after the mixed industrial prints. Markets expect these figures to show whether yen-driven cost pressures are beginning to weigh on household outlays, with implications for the Bank of Japan’s assessment of demand sustainability ahead of upcoming decisions. The Current Account Balance print will be watched for evidence of export strength that could offset softer domestic momentum. Both releases matter because they feed directly into the BoJ’s evaluation of whether above-target inflation can be sustained without additional policy support. No high-impact central-bank speakers are scheduled, so price action will likely hinge on whether the data confirm the selective resilience seen in prior weeks. OIS markets will parse any downside surprises for clues on whether the next meeting could still deliver a measured adjustment. Broader USD/JPY moves will remain the dominant external variable shaping intervention probabilities and yield direction into the following week.

Risks & Themes

The week’s data reinforced the risk that yen depreciation continues to outpace BoJ tightening, keeping imported inflation pressures elevated even as headline prints remain contained. Upside scenarios center on stronger-than-expected household and external balance figures that could accelerate OIS repricing for additional rate moves over coming quarters. Downside risks include further industrial production shortfalls that might prompt markets to question the durability of the mid-expansion narrative. Current BoJ OIS pricing appears to understate the probability of faster adjustment if corporate optimism translates into sustained wage gains. Intervention bets have intensified during the holiday lull, raising the chance of sharper intraday volatility in USD/JPY that could spill into JGB yields and equity flows. Overall, the market continues to price a measured exit path that may prove too slow relative to the pace of currency-driven cost pressures.

Week in Review

GDP Rebound Confirmed April GDP rose versus consensus, reversing the prior contraction and supporting the view that second-quarter activity has stabilized after a period of stagnation.

Macklem Speech Sets Hawkish Tone Governor Macklem emphasized that inflation sits above target and that the Bank remains content with the current policy rate, citing balanced risks around productivity gains and financial imbalances.

Markets Digest Mixed Signals The S&P/TSX closed the week at 35247.3 after a 1.22% gain, while USD/CAD stayed at 1.42.

Energy and Yield Dynamics WTI Crude fell to 68.78 and Brent to 72.13, yet Natural Gas rose to 3.24 and Gold advanced to 4187.3, illustrating commodity divergence that left CAD crosses largely unchanged.

Policy Path Unchanged The Bank of Canada held its policy rate steady, with OIS curves showing limited near-term easing priced through the next decision.

Data Dependence Reinforced The GDP beat and Macklem’s remarks together kept markets focused on incoming prints rather than any shift in the current stance.

Labor and Housing Context Prior employment gains and subdued housing data continued to weigh on growth forecasts, aligning with the Bank’s data-dependent approach.

External Spillovers US inflation resilience and fewer expected Fed cuts added external pressure that reinforced the Bank of Canada’s hold bias.

Overall Arc The week traced a path from soft prior momentum to a confirmed rebound, tempered by explicit above-target inflation warnings that anchored expectations for unchanged policy.

BoC Watch

Governor Macklem’s speech delivered the clearest signal of the week, stating inflation remains above the 2% target and endorsing the current policy rate without signaling imminent change. The Bank held the rate steady, consistent with OIS curves that continued to price only limited easing by year-end. April GDP strength did not alter the forward guidance, as Macklem highlighted balanced risks around productivity and financial imbalances. Canada 2-year yields remained anchored while the 10-year yield rose, reflecting modest curve steepening. Overall, the data flow and speech kept BoC OIS-implied probabilities for a cut at the next meeting largely unchanged.

The Week Ahead

Monday brings the Bank of Canada Business Outlook Survey and Survey of Consumer Expectations, both expected to inform inflation and growth perceptions ahead of the next policy decision. Tuesday features the Trade Balance and the Ivey PMI, providing an early read on service-sector momentum. Friday delivers the labor report, including the unemployment rate and employment change. These releases will test whether the April GDP rebound is broadening or whether labor-market slack is re-emerging. Stronger-than-expected prints could reinforce the Bank of Canada’s hold stance, while downside surprises would keep limited easing priced into BoC OIS curves for upcoming decisions. Markets will parse the data for any shift in the balance of risks around above-target inflation and growth in coming quarters.

Risks & Themes

The week’s GDP beat reduced near-term recession fears but left the Bank of Canada focused on persistent above-target inflation, limiting the scope for near-term easing. External US data resilience continues to anchor global rate expectations higher, which could keep CAD under modest pressure through the dollar channel. Upside risks center on stronger labor or survey prints that would further delay any policy adjustment, while downside risks include renewed energy-price weakness that could weigh on export revenues. Markets appear to be correctly pricing a prolonged hold, yet any sustained outperformance in activity data could push terminal-rate expectations higher than currently reflected in BoC OIS curves.

Week in Review

Business Sentiment Improves Modestly Mexico’s business confidence improved in June, marking the first material domestic data release since late May and pointing to steady manufacturing and services outlooks. The print arrived alongside continued nearshoring inflows that supported foreign direct investment flows into automotive and semiconductor projects in Chihuahua and Tamaulipas. Peso and Equity Markets Show Resilience USD/MXN eased 0.14 percent to close at 17.48 while EUR/MXN rose 0.35 percent to 20.0, reflecting selective peso strength against the dollar on thin positioning. IPC Bolsa declined 0.86 percent to 67060.49 over the week as foreign flows rotated toward higher-yielding assets elsewhere, yet daily moves remained contained. Yield Curve Steepens on Duration Caution Mexico short-term rate held steady throughout the period while the long-term rate stayed unchanged, widening the spread and signaling investor caution on fiscal spending needs tied to infrastructure financing discussions with BlackRock, KKR and Macquarie. WTI Crude fell 2.78 percent to 68.78 and Brent Crude advanced 4.1 percent to 4187.3, trimming energy export revenues without disrupting the broader external financing position. Data Flow Confirms Prior Expectations The absence of consensus misses aligned with the contained inflation backdrop inherited from prior weeks, leaving Banxico OIS curves pricing only limited near-term adjustments. Remittance inflows and private-sector energy permits continued to underpin the current-account surplus, reinforcing Mexico’s external resilience even as USMCA extension talks missed the July 1 target. Overall the week delivered a cohesive narrative of domestic stability offsetting external trade uncertainty without challenging the mid-expansion cycle.

Banxico Watch

Banco de Mexico maintained the policy rate with no speakers or minutes released during the week, keeping Banxico OIS pricing stable for the next decision. The business confidence improvement reinforced the view that domestic demand remains on track, limiting pressure for near-term easing. Forward guidance from prior meetings continues to tolerate above-target inflation prints to support growth, consistent with the broader DM central-bank pattern. OIS curves showed only marginal shifts after the data, preserving the measured pace of any future adjustments. The combination leaves the rate path dependent on upcoming inflation prints rather than immediate policy signals.

The Week Ahead

Mexico Inflation Rate Month-over-Month and Inflation Rate Year-over-Year are scheduled for release on July 9 at 08:00 ET, providing the first direct read on price pressures since the prior print. Markets will assess whether the modest business confidence improvement translates into firmer second-quarter demand that could influence the next Banxico meeting. Consensus expectations remain anchored around contained outcomes that would support the current policy rate. The prints matter for Banxico OIS repricing because they will update the disinflation trajectory inherited from earlier easing cycles. Day-by-day focus centers on the July 9 inflation data as the dominant local release, with no central-bank speakers expected before the decision window. Any upside surprise would likely compress duration and keep OIS curves tilted toward a hold, while a downside print could reopen limited easing probabilities in coming quarters. External USMCA review discussions will run in parallel and could add volatility to USD/MXN ahead of the data.

Risks & Themes

The stalled USMCA extension past the July 1 deadline introduces downside risk to manufactured exports and nearshoring momentum if annual reviews replace multi-year stability. Upside scenarios center on continued remittance and FDI inflows that could further support the peso even if inflation prints surprise higher. Market pricing currently underweights the fiscal spending needs implied by the steepened yield curve at the long-term rate, leaving room for duration pressure if infrastructure talks accelerate. The data flow this week did not shift the broader outlook materially from prior weeks, confirming that Banxico will remain data-dependent into the next decision. Selective equity rotation away from IPC Bolsa highlights the risk that global rate paths re-anchored higher could continue to weigh on EM duration assets.

Week in Review

Labor Market Cooling Signals Demand Softening Brazilian formal employment added fewer jobs in May than prior trends, which immediately pushed DI futures lower and increased the probability of a Selic reduction at the upcoming COPOM decision. The print reinforced the gradual slowdown already visible in earlier labor data and highlighted weaker wage pressure transmission into consumption.

Industrial Output Undershoots and Growth Momentum Fades May Industrial Production contracted month-over-month against consensus expectations, extending the uneven pattern seen in the prior gain and leaving Q2 manufacturing nowcasts lower. The miss arrived alongside June PMI readings that showed only modest expansion, with sales and production sub-indices softening further.

Equity and Currency Markets Navigate Thin Liquidity Bovespa recovered to close the period with a net gain, while USD/BRL traded in a narrow range amid holiday-thinned volumes and commodity price swings. Petrobras and Vale shares declined as WTI Crude moved lower.

Fiscal and External Backdrop Remains Constraining The IFI projection of gross debt reaching a higher share of GDP by 2036 continued to weigh on sentiment even as stronger tax receipts narrowed the May primary deficit, leaving limited room for stimulus while the Selic stays elevated. Export volumes in iron ore and soybeans provided some offset to softer global prices.

Policy Expectations Shift Modestly Lower Markets responded to the jobs and production data by pricing easing into the next COPOM meeting, reversing part of the hawkish tone that followed the prior cut. Short-term rates remained fixed with only modest yield compression in the futures curve.

BCB Watch

Banco Central do Brasil kept the Selic steady through the week, consistent with the measured pace signaled after the prior reduction. Weak CAGED and Industrial Production prints prompted a modest downward shift in BCB OIS pricing, with markets now embedding a higher probability of easing at the next decision. No COPOM speakers or minutes were released, leaving the Focus survey and incoming activity data as the main inputs for forward guidance. The combination of cooling labor demand and softer manufacturing output suggests the central bank may tolerate a slightly faster pace of cuts than previously anticipated while still monitoring fiscal risks. OIS curves therefore reflect a narrow window for the first move rather than an aggressive easing cycle.

The Week Ahead

Retail Sales Month-over-Month for May releases on Wednesday and will provide the first post-holiday read on consumer resilience after the weak CAGED print. Inflation Rate Month-over-Month and Year-over-Year figures due Friday will update the disinflation trajectory and directly inform the Banco Central do Brasil’s assessment of the real-rate buffer. Trade Balance data on Monday should confirm whether export volumes continue to offset softer commodity prices. Markets will watch whether the inflation prints remain consistent with the current Selic path or accelerate the repricing already visible in DI futures. Any downside surprise in retail sales would reinforce expectations for an earlier adjustment at upcoming decisions, while a firm inflation outcome could re-anchor the curve toward a longer hold. The data flow arrives ahead of the next COPOM meeting and will shape OIS-implied probabilities for the remainder of the year.

Risks & Themes

The week’s activity misses tilt the growth outlook lower and raise the probability of a faster Selic path than markets had priced after the prior hawkish cut. Upside risks center on resilient export volumes and any rebound in services PMI that could delay easing, while downside risks stem from further labor-market cooling feeding into weaker retail sales. Fiscal concerns around the debt-to-GDP trajectory remain a medium-term constraint that could limit the central bank’s room to ease even if growth data disappoint. Markets appear to be under-pricing the persistence of above-target inflation spillovers from the global cycle, leaving BCB OIS vulnerable to repricing if incoming inflation data surprise to the upside.

Week in Review

Commodity Moves and Thin Domestic Data Flow The week featured no Argentine economic releases, directing attention to external price signals that shaped local asset performance. Soybean prices edged lower, providing limited support to export-tax collections and trade-surplus targets.

Equity and FX Price Action Reflect Selective Flows The MERVAL index posted a net 4.1 percent weekly gain. USD/ARS rose steadily to close at 1,488.00, illustrating persistent but contained dollar demand. EUR/ARS rose 1.04 percent to 1,701.69.

Growth Optimism Challenges Policy Sequencing External commentary highlighted a stronger GDP outlook that now pressures the BCRA to delay rate cuts, consistent with the absence of fresh monetary-aggregate data. Fiscal consolidation narratives remained intact, with primary-surplus credibility supported by commodity revenues rather than new domestic prints. Indexation trends continued to cool gradually, aiding disinflation momentum without requiring immediate policy adjustment.

Quiet Calendar Leaves Markets Data-Dependent Overall activity stayed subdued. The configuration leaves the expansion trajectory intact but tilts near-term attention toward commodity volumes and reserve-accumulation metrics ahead of the next BCRA decision window.

BCRA Watch

The BCRA maintained its existing stance with no speeches, minutes, or reserve interventions reported during the period. A firmer GDP trajectory cited in market commentary now complicates the sequencing of any upcoming easing, keeping BCRA OIS curves stable and pricing only limited near-term cuts. External commentary reinforced that stronger activity data will likely keep the policy rate on hold through the next meeting. OIS-implied probabilities showed no material shift after the quiet data week, reflecting the central bank’s data-dependent posture.

The Week Ahead

Monday opens with Singapore retail-sales prints that may influence broader EM sentiment and ARS cross flows. Tuesday features German factory orders, which could affect global risk appetite and commodity demand relevant to Argentine exports. Mid-week brings Danish manufacturing production and Romanian retail sales, offering secondary signals on European demand that feed into BCRA reserve-accumulation expectations. Later in the week, attention turns to any BCRA foreign-exchange operations or weekly reserve updates that could preview liquidity conditions ahead of the next policy decision. Markets will also monitor soybean export registrations and Treasury bill reopenings for clues on external funding appetite. Stronger-than-expected commodity volumes would reinforce the case for sustained primary surpluses, while softer prints could accelerate OIS repricing toward earlier easing. The absence of domestic inflation or activity releases keeps the focus on external drivers and their implications for the BCRA rate path over coming quarters.

Risks & Themes

A sharper reversal in soybean prices would directly pressure export-tax collections and reserve-building targets, potentially widening the trade surplus shortfall. Continued gradual peso depreciation risks lifting imported inflation components and complicating the disinflation path already embedded in BCRA OIS pricing. Markets appear to underprice the possibility that stronger GDP data forces a longer hold on the policy rate, leaving terminal-rate expectations too dovish. Upside surprises in global grain demand would support fiscal credibility and reduce the need for capital-control adjustments, while downside commodity scenarios could reintroduce volatility into USD/ARS ahead of upcoming decisions.

Week in Review

Commodity-Driven FX and Equity Divergence Regional markets moved on external price signals rather than domestic releases during the week ending July 5, 2026. Copper rose, lifting MSCI Chile intraday but producing a net 1.68 percent weekly decline to 39.13. MSCI Peru advanced 2.03 percent to 84.13 as gold rose 4.1 percent to 4,187.30, supporting mining export valuations. MSCI Colombia showed no net change across four sessions.

Currency Repricing and External Balances USD/COP fell steadily, a 3.07 percent weekly gain for COP that coincided with Brent crude at 72.13 after a 1.39 percent decline. USD/CLP eased 0.24 percent to 919.75 while USD/PEN rose 1.71 percent to 3.40, reflecting limited pass-through from copper strength into PEN. These moves occurred against a backdrop of zero macroeconomic prints from Colombia, Chile, or Peru, leaving price action tied to global metals and energy benchmarks.

Policy Rate Stability Amid Thin Data Chile’s short-term rate stayed unchanged with no central-bank meetings or inflation prints altering the path. The absence of activity or price data reinforced expectations that BanRep, BCCh, and BCRP would maintain current settings into the next decisions. Cross-border corporate news, including Cencosud’s acquisition of Makro Colombia, provided secondary equity support without shifting fiscal or monetary baselines.

Through-Line and Consensus Alignment The week’s arc confirmed that Andean assets track commodity volatility more closely than local indicators when calendars are empty. Copper’s 2.07 percent net gain and gold’s advance aligned with selective equity outperformance in Peru while Chile equities lagged, illustrating uneven transmission. FX moves showed COP and CLP resilience against a softer Brent print, consistent with prior weeks’ emphasis on external balances rather than domestic demand surprises. No consensus misses emerged because no releases occurred.

Andean Central Banks Watch

BCCh held the policy rate steady with no speakers or minutes altering forward guidance, keeping BanRep/BCCh/BCRP OIS curves stable through the next decisions. The lack of inflation or activity prints left market pricing for easing unchanged despite Chile’s equity weakness. Copper at 6.22 and Brent at 72.13 imply steady royalty inflows that reduce pressure on fiscal accounts and support the current rate path. OIS curves showed no meaningful repricing after the week’s commodity moves, confirming that BanRep, BCCh, and BCRP remain data-dependent into coming quarters.

The Week Ahead

Next week’s calendar contains no high-impact releases for Colombia, Chile, or Peru, directing attention to external commodity prints and any BanRep/BCCh/BCRP reserve updates. Traders will watch copper and gold flows for spillovers into royalty collections and current-account forecasts ahead of the next policy meetings. Any follow-through in Brent crude near 72.13 could influence Colombia’s fiscal balance expectations without altering BanRep OIS curves materially. Regional equity and FX positioning will likely remain sensitive to global risk sentiment given the empty domestic slate. BCRP may issue routine reserve data that clarifies PEN support after the recent 1.71 percent move in USD/PEN. Overall, the data-light period keeps rate-path expectations anchored until fresh inflation or activity figures arrive in subsequent weeks.

Risks & Themes

The week’s commodity-led moves leave upside risks to Andean fiscal balances if copper holds near current levels and gold sustains gains, narrowing projected current-account gaps. Downside scenarios center on renewed Brent weakness that could widen Colombia’s revenue shortfall without offsetting domestic data. Markets appear to price limited near-term easing from BCCh given the unchanged rate anchor, yet any acceleration in Chile activity softness could shift BanRep/BCCh/BCRP OIS curves faster than currently reflected. Selective equity outperformance in Peru versus Chile highlights mispricing risks around mining exposure versus broader regional sentiment.

Week in Review

UK markets absorbed a clear dovish data pulse on housing credit that was more than offset by hawkish BoE communication. Housing credit weakens sharply Mortgage approvals declined against consensus while net mortgage lending and consumer credit also undershot expectations. These prints marked the largest sequential decline in approvals since late 2023 and reinforced downside risks to near-term consumption. Policy rhetoric turns decisively hawkish Governor Bailey explicitly ruled out near-term rate reductions, noting that inflation dynamics remain inconsistent with easing and that prior tightening has not yet fully transmitted to households. Deputy Governor Pill and Breeden delivered similarly data-dependent remarks that left BoE OIS pricing little changed. Equities and sterling decouple from domestic softness The FTSE 100 posted a 1.86% weekly gain while GBP/USD climbed 1.16%, supported by the relative hawkishness versus other DM central banks. The 10-year gilt yield rose 2.51% to 4.94%, embedding a higher terminal-rate path. Cycle position remains mid-expansion Prior-week Flash PMIs had already flagged services contraction, yet the latest credit and housing data did not alter the broader growth trajectory anchored by Q1 GDP expansion. Markets therefore enter the July 6-10 window with clearer evidence that the Bank of England will tolerate above-target prints to avoid premature easing.

BoE Watch

Bank of England communication this week reinforced a higher-for-longer stance. Governor Bailey stated explicitly that rate cuts remain off the table given persistent inflation pressures and incomplete transmission of prior tightening. Deputy Governor Pill highlighted the rates split without altering forward guidance, while Breeden focused on financial-stability risks. These remarks followed the mortgage-approvals miss and kept BoE OIS curves from pricing meaningful near-term easing. The Bank Rate continues to anchor market expectations, with CPI and unemployment providing the data backdrop. Markets now anticipate that any future adjustment will remain data-dependent and gradual, consistent with the committee’s tolerance for above-target prints. The week’s rhetoric therefore shifts the medium-term rate path modestly higher relative to earlier June pricing.

Data Review

The week’s high-impact releases centered on credit and housing indicators that delivered consistent downside surprises. Mortgage approvals fell from the prior reading, missing consensus by a wide margin and marking the weakest print since December 2023. Mortgage lending contracted against expectations, while consumer credit expanded only modestly versus forecast. The current-account deficit narrowed modestly, slightly better than consensus. Nationwide house prices were unchanged month-over-month yet rose year-over-year, below expectation. These outcomes point to a cooling housing market that adds downside risk to consumption without yet feeding into lower wage or inflation prints. CPI remains elevated year-over-year and unemployment sits at a tight level, leaving the labour market firm enough to sustain wage pressures. The combination keeps the BoE rate path anchored higher for longer, with OIS curves showing only limited near-term repricing. The data therefore confirm that domestic demand is moderating gradually while external commodity moves, including Brent, provide only modest disinflationary offset.

The Week Ahead

Attention turns to housing and construction indicators that will test the durability of the recent credit softening. Monday brings the S&P Global Construction PMI, with consensus at 40.1, a level that would confirm further contraction in the sector. Tuesday features the Halifax House Price Index, expected to show a 0.1% month-over-month rise after the prior print. Wednesday delivers the RICS House Price Balance, with consensus at -32 versus the prior reading, offering a forward-looking gauge of surveyor sentiment. No high-impact BoE speakers are scheduled, leaving the data to drive OIS repricing. These releases matter because they directly inform the consumption and housing channels that Bailey flagged as incomplete in transmission. A further downside surprise in construction or prices would reinforce the case for measured policy adjustment later in the year, while any resilience would support the current hawkish tilt. Sterling volatility is likely around the Halifax and RICS prints given their weight in household balance-sheet forecasts.

Risks & Themes

The week’s data shift the outlook toward greater downside risk in housing activity without yet altering the inflation trajectory. An extended period of weak mortgage approvals could feed into lower consumption and prompt markets to reprice BoE OIS curves more aggressively than current levels embed. Upside scenario centers on resilient Halifax and RICS prints that would validate the Bank’s decision to keep cuts off the table. Downside scenario involves further credit contraction that widens the gap between growth and inflation objectives. Positioning shows limited OIS repricing after the Bailey comments, suggesting markets may be underweight the persistence of above-target prints. Volatility in sterling crosses remains elevated around speech and data windows, while gilt futures reflect the higher terminal-rate path. Flow considerations favor continued support for GBP on any further hawkish differentiation versus euro-area peers.

Cross-Asset

Equities, bonds, FX and commodities moved in a configuration that reflected BoE hawkish signals overriding domestic credit weakness. The FTSE 100 posted a 1.86% weekly gain to 10,679.00 while the FTSE 250 advanced 2.28% to 23,538.80. Daily moves included a 1.67% rally on July 2 that reversed earlier modest losses. The 10-year gilt yield climbed 2.51% to 4.94%, lifting the front end of the curve and reducing OIS-implied cut probabilities. GBP/USD rose 1.16% to 1.33 with daily gains of 0.43% on June 30 and 0.45% on July 4. GBP/EUR advanced 0.67% to 1.17. Brent crude declined 1.39% to 72.13 while gold surged 4.1% to 4,187.30 on safe-haven flows. UK nat gas rose 2.01% to 3.24. The configuration shows sterling and gilt yields responding directly to Bailey’s “rate cuts off the table” message, while equities benefited from the broader DM divergence narrative.

Global Context

US data resilience continues to shape DM rate paths, with above-target inflation prints keeping the first Fed adjustment priced no earlier than mid-2027. This backdrop limits the scope for BoE easing even as UK housing credit weakens. Euro-area divergence, with French Composite PMI rising while German readings fell, adds selective support to sterling via the cross-rate channel. Brent crude at 72.13 extends the external disinflation impulse that began earlier in June, partially offsetting domestic wage pressures. Trade and geopolitical spillovers from US-Iran tensions and semiconductor-tariff developments remain secondary for UK assets over the past seven days but could amplify sterling volatility if energy prices rebound.

Week in Review

Equity resilience amid thin volumes Nordic equity markets advanced over the five trading days despite pre-holiday liquidity, with OMX Stockholm 30 rising 2.53 percent to close at 3247.03 on Friday after a 1.14 percent daily gain. OMX Copenhagen 25 delivered the strongest performance, climbing 5.21 percent to 1899.12, while Oslo Bors added 1.97 percent to 1943.93 and OMX Helsinki 25 gained 1.92 percent to 6268.65.

Swedish data surprises reinforce domestic momentum Sweden’s trade balance swung to surplus. The print arrived without immediate follow-through in other Nordic releases.

Commodity and currency cross-currents Brent crude ended at 72.13 after a 1.39 percent weekly decline, weighing on Norwegian energy names yet offset by Norges Bank’s daily NOK purchases that kept USD/NOK 1.17 percent lower at 9.82. USD/SEK fell 0.98 percent to 9.64 while EUR/SEK eased 0.36 percent to 11.04, reflecting modest Nordic currency appreciation against the dollar.

Policy signals remain contained Riksbank certificate sales continued without balance-sheet adjustments, and Danmarks Nationalbank and Bank of Finland stayed aligned with unchanged ECB deposit-rate expectations. The absence of fresh inflation or activity prints across Denmark and Finland left markets focused on external euro-area spillovers rather than independent Nordic drivers.

Nordic Central Banks Watch

Riksbank officials reiterated the need for efficient cross-border payments without altering forward guidance. Norges Bank’s July NOK purchase program responded to oil revenue flows near 72 dollars per barrel yet left Norges Bank OIS curves stable. Danmarks Nationalbank maintained its ERM II peg with no intervention signals, while Bank of Finland tracked ECB communications that continued to emphasize data dependence. OIS pricing for both Riksbank and Norges Bank showed no material shift toward earlier or later adjustments at the next meetings, consistent with the week’s limited domestic releases. The combination of contained Brent levels reinforced expectations that both central banks will tolerate above-target prints to support growth into coming quarters.

The Week Ahead

Monday brings Singapore retail sales and Danish manufacturing production month-over-month, offering the first post-holiday gauge of consumer and industrial momentum that could influence export-sensitive Nordic sectors. Tuesday features German factory orders month-over-month, a release that matters for Swedish and Finnish manufacturing outlooks given their euro-area linkages. Mid-week euro-area PMI revisions will feed directly into Bank of Finland and Riksbank assessments of regional demand. Norway’s June unemployment figures arrive later in the week and are expected to remain consistent with Norges Bank’s current rate-path assumptions. Danish and Finnish markets will also monitor any follow-through from ECB speakers on the deposit-rate trajectory. Thin summer volumes may amplify moves in EUR/SEK and EUR/NOK if external data surprise. Overall, the calendar points to external rather than domestic drivers shaping rate expectations ahead of upcoming decisions.

Risks & Themes

Downside risks center on further Brent declines that could pressure Norwegian fiscal flows and NOK despite Norges Bank purchases. Upside scenarios include sustained equity inflows into OMX Copenhagen 25 if euro-area data confirm resilience, supporting Danish growth without Danmarks Nationalbank intervention. The data dependence shared by all four central banks leaves room for mispricing if euro-area PMIs revise higher, potentially steepening Nordic yield curves faster than current pricing implies.

Week in Review

Poland disinflation reaches target. Poland’s preliminary June CPI fell from the prior reading, undershooting consensus and landing at the NBP target. The print reflected broad-based softening in food and energy components that eased pressure on the central bank’s hold bias.

Turkey external balance improves. Turkey’s May trade deficit narrowed from the prior reading and aligned with consensus, while unemployment held steady. The improvement coincided with USD/TRY rising 0.39% week-over-week to 46.8. Regional FX remained contained, with EUR/HUF climbing 0.59% to 353.86 and EUR/CZK declining 0.41% to 24.13.

CEE equity and bond divergence persists. BIST 100 closed the week at 14417.9 after a 1.65% gain, while iShares Poland advanced 2.49% to 39.44. Poland 10Y yields rose while Hungary 10Y yields fell, reflecting rotation into local duration. Brent crude declined 1.39% to 72.13, supporting energy importers across the region. The week’s data flow confirmed selective resilience in external balances while domestic inflation trajectories diverged.

Emerging Europe Central Banks Watch

NBP speakers highlighted that the June CPI print removes near-term easing pressure and keeps real rates positive at the prevailing policy rate. No CNB, MNB or BNR decisions or minutes were released during the week. CBRT maintained its policy rate amid expectations that June inflation prints would confirm the ongoing disinflation path. OIS curves showed no material repricing for NBP or CNB cuts through year-end following the Polish data. Hungary’s improving industrial contribution to GDP, first positive since 2022, supported MNB’s measured stance. Romania data remained sparse, leaving BNR on hold with limited forward guidance shifts. The week’s inflation undershoot in Poland reinforced the view that NBP will tolerate above-target prints elsewhere in CEE before adjusting the rate path.

Data Review

Poland’s June CPI outturn beat consensus and marked a decline from the prior reading, keeping the print at the NBP target. Turkey’s May trade balance matched consensus and narrowed from the prior reading, confirming improvement in the external position. Unemployment remained unchanged. Poland’s June PMI slump contrasted with expanding factory output in both Czech Republic and Hungary, highlighting intra-CEE divergence in manufacturing momentum. The Polish CPI undershoot reduces the probability of near-term NBP easing and supports positive real rates at the current policy level. Turkey’s narrower trade gap arrived alongside sticky core inflation prints scheduled for the following day, keeping CBRT on hold. Overall, the week’s releases pointed to mid-cycle stabilization in Poland and Hungary while Turkey’s inflation path remains the outlier.

The Week Ahead

Poland’s central bank interest rate decision is scheduled for July 8 with consensus holding the rate steady. Turkey industrial production y/y data prints on July 10 and will test the resilience of recent manufacturing momentum. Romania retail sales m/m and y/y releases on July 6 will provide the first post-heatwave read on consumer demand. Germany factory orders m/m due July 6 carry spillover implications for Czech and Hungarian exporters. Singapore and Denmark manufacturing prints on July 6 offer additional external demand color. No Tier-1 central bank speakers from NBP, CNB, MNB, BNR or CBRT are flagged for the period. Markets will focus on whether the Polish rate decision language acknowledges the June CPI undershoot. The data slate remains light relative to the prior week, limiting scope for large OIS repricing.

Risks & Themes

Poland’s return to the NBP target lowers the probability of an early cut and reduces downside risks to the zloty. Turkey’s structurally negative real rates continue to pressure TRY positioning despite the narrower trade gap. Heatwave-related downside risks to industrial output and construction remain elevated across Poland, Czech Republic and Hungary. EU cohesion fund disbursements represent a key swing factor for growth. Market mispricing appears limited, with OIS curves already reflecting a higher-for-longer NBP stance. Volatility in regional FX stayed contained. Upside scenarios center on further commodity price relief supporting external balances, while downside risks stem from any reacceleration in Turkish core inflation.

Cross-Asset

BIST 100 rose 1.65% week-over-week to close at 14417.9. iShares Poland advanced 2.49% to 39.44. EUR/PLN ended unchanged at 4.29. EUR/HUF climbed 0.59% to 353.86 while EUR/CZK fell 0.41% to 24.13. Poland 10Y yields increased and Hungary 10Y yields dropped. Brent crude fell 1.39% to 72.13 and gold rose 4.1% to 4187.3. Bitcoin gained 5.37% to 62727.3. The moves reflected rotation into Polish equities and Hungarian duration after the CPI undershoot, with limited FX volatility across the complex.

Global Context

US data resilience continued to anchor global cycle expectations, with activity strength shifting market pricing for the first Fed cut to no earlier than mid-2027. Euro-area splits persisted as French composite PMI rose while German composite fell. Japanese flash PMIs delivered beats that lifted 10-year JGB yields. WTI crude extended its decline, providing additional disinflationary impulse for energy importers in the region. Emerging-market outcomes diverged along domestic inflation and commodity lines, with selective equity gains recorded even as external balances faced dollar-driven pressure. The configuration leaves CEE and Turkish rate paths dependent on US terminal rate repricing through the dollar channel.

Week in Review

External Trade Reversal South Africa recorded a reversal in external balances as the latest trade data printed a deficit against prior surplus prints. Export momentum softened under prevailing commodity prices. The data confirmed weaker external demand after mining output adjustments noted in prior weeks.

Equity and Currency Resilience The JSE Top 40 advanced 1.25% over the week to close at 103108.6. USD/ZAR declined 1.52% to 16.22 while EUR/ZAR eased 1.11% to 18.55, reflecting contained risk appetite amid global dollar moves. Platinum climbed 4.92% to 1651.9 and gold rose 4.1% to 4187.3, providing direct support to mining equities and rand sentiment.

Policy Rate and Yield Stability South Africa short-term rate edged higher while the long-term rate climbed, aligning with the prevailing SARB repo level. Naspers declined 6.02% to 78849.0 over the week, weighing on broader index composition despite resource gains. Brent crude fell 1.39% to 72.13, adding modest disinflationary pressure without altering domestic rate expectations.

Social and Supply-Side Overlays Anti-migrant protests escalated with more than 3000 troops deployed, coinciding with the departure of foreign nationals and disruptions to retail and logistics near Durban. Eskom maintained stage-2 load-shedding after the Medupi outage, highlighting persistent energy supply risks into the second half of the year. The combination left domestic growth signals largely unscathed but introduced downside risks to foreign investor sentiment.

SARB Watch

The SARB kept the policy rate steady with no MPC decision or minutes released during the week. Governor Kganyago highlighted upside risks to inflation expectations above the 3% target, reinforcing a data-dependent stance ahead of the next meeting. SARB officials noted that Middle East conflict lifted rand turnover but left domestic growth largely unscathed. OIS curves showed limited near-term repricing after the trade data print, keeping implied easing probabilities contained through the upcoming decision. Private-sector credit growth slowed in May, adding pressure on bank margins and rand liquidity without shifting the forward guidance trajectory.

The Week Ahead

No high-impact South African data releases are scheduled for 6–10 July, leaving markets focused on follow-through from recent external balance and inflation expectations prints. Global factory orders from Germany and retail sales from Singapore on 6 July will set the external tone for rand and commodity flows. Any SARB Quarterly Bulletin updates expected mid-week could provide fresh credit and balance-sheet detail ahead of the next MPC meeting. Markets will monitor Eskom plant availability for signs of sustained load-shedding relief that could support industrial output readings later in the month. Positioning in USD/ZAR is expected to remain light, with sensitivity to platinum and gold price moves that influence JSE mining stocks. The absence of domestic releases keeps attention on external drivers and any follow-up comments from SARB officials on inflation risks.

Risks & Themes

The trade balance swing introduces downside risks to the external balance outlook and could pressure the current account in coming quarters if commodity support fades. Escalating anti-migrant protests risk dampening foreign direct investment and tourism receipts, with Nigeria rejecting South Africa’s response to compensation demands. Persistent housing shortages and infrastructure gaps remain structural drags on domestic demand, limiting the impulse from credit growth. Markets appear to be underpricing the combination of energy supply risks and fiscal consolidation at the 4.5% deficit target, leaving room for steeper long-term yield moves if global dollar strength reasserts. Upside scenarios hinge on sustained platinum and gold gains that could further compress USD/ZAR toward recent lows.

Week in Review

Trade balance surprise dominates export narrative Australia’s May trade balance swung to a deficit, missing consensus and reversing the prior surplus. The print coincided with softer Ai Group Industry Index readings and building permits contracting month-over-month. Commodity-linked equities reflected the shift as BHP closed the week at 60.5 after a 1.14% weekly gain that masked intra-week volatility.

Business sentiment rebound in New Zealand New Zealand ANZ Business Confidence rose, lifting the NZX 50 to 13618.42 for a 0.54% weekly advance. The improvement occurred alongside NZD/USD closing at 0.57 after a 1.28% weekly rise. Domestic data elsewhere remained mixed, with housing approvals continuing to signal cooling demand.

Equity and currency resilience amid external support The ASX 200 finished at 8844.4, up 0.24% for the week, supported by gold rising 4.1% to 4187.3. AUD/USD held at 0.69 after a 0.72% weekly gain even as the trade miss pressured the currency intra-week. Brent crude ended at 72.13 after a 1.39% weekly decline, providing limited relief to import costs.

Policy signals reinforce restrictive stance RBA minutes released mid-week stressed that inflation remains materially above target, with wages and energy cited as upside risks. The committee’s decision to hold the cash rate was accompanied by explicit references to further tightening remaining in play. Australian 10-year yields stayed elevated throughout the period.

Housing and productivity constraints persist Building permits data confirmed ongoing weakness in construction activity, extending the trend seen in prior approvals prints. Productivity concerns noted in RBA commentary continue to cap potential growth. Both economies remain exposed to China demand signals that showed limited follow-through in the trade outcome.

ANZ Central Banks Watch

RBA minutes and Deputy Governor remarks this week reinforced that the cash rate must stay restrictive given inflation above target, with the board flagging upside risks from wages despite slowing activity. OIS pricing shifted only modestly, keeping the probability of an additional hike later this year elevated while near-term cuts remain discounted. In New Zealand, markets positioned for the RBNZ decision with OIS curves showing a hold as the base case ahead of the July meeting. The ANZ Business Confidence surge offered some offset to domestic weakness but did not alter the RBNZ’s data-dependent stance. Overall, both central banks’ communications this week anchored expectations for policy remaining on hold through the next decisions, with limited repricing in RBA and RBNZ OIS curves after the growth misses.

The Week Ahead

The RBNZ interest rate decision on 7 July will set the tone, with consensus pointing to a hold that leaves the cash rate unchanged and OIS curves pricing only gradual adjustment over coming quarters. RBA Assistant Governor Hunter’s speech the same day is expected to reiterate the board’s focus on persistent inflation risks and the need for restrictive settings. Business NZ PMI data on 8 July will provide an early read on manufacturing momentum ahead of the next RBNZ meeting. Retail sales figures later in the week will test whether New Zealand consumer demand is stabilising after earlier softness. On the Australian side, any follow-up housing data will highlight ongoing sensitivity to the cash rate. Markets will watch China-related indicators for signals on commodity export trajectories that could influence both AUD and NZD rate paths. Overall, the data flow is expected to keep RBA and RBNZ OIS curves tilted toward steady policy rather than near-term easing.

Risks & Themes

The large trade deficit miss raises downside risks to Australian growth forecasts and could pressure the RBA to delay any future tightening if export weakness persists. Conversely, the sharp ANZ Business Confidence rebound introduces upside potential for New Zealand activity that may keep the RBNZ on hold longer than currently priced. Gold’s 4.1% weekly gain highlights safe-haven flows that could support AUD outperformance versus NZD if risk sentiment deteriorates further. Markets appear to underprice the persistence of above-target inflation signals from the RBA minutes, leaving OIS curves vulnerable to hawkish repricing on any wage or energy upside surprise. Housing weakness in both countries continues to act as a transmission channel that could amplify any further tightening, while commodity price volatility remains the dominant external risk to the rate outlook.

Week in Review

PMI beats confirm export-led stabilization. China’s June NBS Manufacturing PMI rose above the prior reading and consensus, while non-manufacturing also printed above expectations; the upside was driven by new orders and production sub-indices that reflected resilient overseas demand. RatingDog Manufacturing PMI reinforced the official signal with a modest beat.

Equity markets diverged sharply across Greater China. CSI 300 closed the week at 4,842.17, down 1.72 percent overall, while Shanghai Composite ended at 4,043.64 after a 0.74 percent weekly decline. Hong Kong’s Hang Seng Index advanced 1.4 percent to 23,350.03 as developers stabilized, and Taiwan’s TAIEX gained 3.96 percent to 46,780.62 on AI-related semiconductor flows.

Policy support and currency management anchored sentiment. The PBoC added liquidity through reverse-repo operations and set firmer USD/CNY fixes, contributing to USD/CNY closing 0.28 percent lower at 6.78. HKMA statements emphasized expanded yuan usage without altering the 7.84 peg level.

Commodity and external demand linkages strengthened. Copper rose 2.07 percent to 6.22 on China growth optimism while Brent crude fell 1.39 percent to 72.13, illustrating selective price support from domestic activity data rather than broad commodity strength.

Greater China Central Banks Watch

The PBoC maintained a patient stance after the PMI beats, conducting routine reverse-repo operations and injecting liquidity without signaling broader easing. The daily yuan fix was set stronger on multiple days, anchoring USD/CNY near 6.78 and limiting OIS-implied rate-cut probabilities through year-end. HKMA urged banks to widen yuan usage scope and prepare additional internationalization measures in coming weeks while keeping aggregate balance ample and the 7.84 peg mechanically stable. CBC focused on semiconductor export trends that supported TAIEX outperformance without altering policy guidance. The June PMI data reduce immediate pressure for broad-based PBoC easing yet leave scope for targeted liquidity tools if domestic demand remains soft. Forward guidance continues to emphasize stability over outright accommodation, consistent with the medium-term rate path priced by OIS curves.

Data Review

China June NBS Manufacturing PMI rose above consensus and the prior reading, with new orders and production sub-indices providing the largest positive surprise relative to expectations. Non-manufacturing PMI reached above consensus, marking the first reading above 50 since April and signaling services stabilization. RatingDog Manufacturing PMI edged above consensus, confirming the official momentum. These prints followed earlier industrial profits growth that had already moderated from prior months. The data indicate the economy remains in a soft-landing phase supported by external orders rather than broad domestic demand recovery. Inflation and PPI releases scheduled for July 8 will test whether the PMI improvement translates into price pressures that could alter the PBoC’s measured liquidity stance. Overall, the June data reduce the urgency for broad-based easing while leaving room for targeted tools ahead of the Politburo meeting.

The Week Ahead

China inflation data on July 8 will lead the calendar, testing whether the PMI expansion feeds into price pressures. Retail sales and industrial production figures later in the week will provide further confirmation of domestic demand trends. PBoC liquidity operations are expected to remain routine ahead of any Politburo signals. HKMA will monitor USD/HKD flows while advancing yuan internationalization pilots. CBC speakers are likely to address semiconductor export resilience and any cross-strait trade updates. Markets will watch for any divergence between official and private PMI follow-through in services. The July 8 inflation release carries particular weight for OIS repricing given the recent activity beats. Overall, the week’s data should clarify whether external demand momentum can offset persistent domestic softness.

Risks & Themes

The June PMI beats have modestly shifted positioning toward reduced near-term easing probabilities, yet markets may still underprice downside risks if July inflation prints disappoint. Upside scenario centers on sustained export orders lifting industrial profits further. Downside risks remain tied to property transaction weakness and tier-3/4 city overhang that the expanded white-list measures have not fully resolved. Volatility in mainland equities stayed elevated with daily moves exceeding 2 percent on multiple occasions. Flow considerations favor Taiwan semiconductor names while Hong Kong developers lag on thin volume. Cross-border yuan initiatives from HKMA could support longer-term de-dollarization flows but carry limited immediate impact on rate paths. Overall positioning appears neutral on PBoC policy after the data-driven repricing.

Cross-Asset

Equities showed clear regional divergence with TAIEX rising 3.96 percent to 46,780.62 on semiconductor strength while CSI 300 fell 1.72 percent to 4,842.17 and Shanghai Composite declined 0.74 percent to 4,043.64. Hong Kong’s Hang Seng Index posted a 1.4 percent weekly gain to 23,350.03. Bonds remained stable with no material yield shifts reported in the 2-year or 10-year segments. FX markets featured USD/CNY declining 0.28 percent to 6.78 after the PBoC’s firmer fixes, while USD/HKD held essentially flat at 7.84. Commodities reflected selective China demand with copper advancing 2.07 percent to 6.22 and gold rising 4.1 percent to 4,187.30; Brent crude fell 1.39 percent to 72.13 amid softer global pricing.

Global Context

US data resilience continued to shape global rate expectations with the first Fed cut still priced no earlier than mid-2027 after recent activity prints. This environment supported selective equity rotation into Taiwan semiconductors while pressuring broader regional valuations. Trade tensions with the EU remained a live risk as officials expressed concern over stalled reset talks and bilateral imbalances. Brent crude’s 1.39 percent weekly decline reflected softer global growth pricing that could spill into China’s export momentum. Gold’s 4.1 percent advance highlighted safe-haven demand amid persistent dollar strength. Cross-border spillovers from US inflation persistence continue to anchor PBoC and CBC policy patience.

Week in Review

Export surge offsets domestic softening. South Korea recorded a sharp acceleration in exports, driven by AI chip demand that also lifted the S&P Global Manufacturing PMI despite the sequential drop from the prior reading. Inflation prints at multi-month highs. The June inflation rate rose to a multi-month high, matching consensus amid oil and harvest effects and leaving the BoK base rate unchanged. Equity and currency volatility dominated flows. KOSPI closed the week at 8088.34 after a 3.65% decline that included a large single-day drop on July 2, while USD/KRW traded in a narrow range before ending at 1528.99. Policy intervention and market infrastructure changes. Authorities intervened to defend the currency near multi-year lows, coinciding with the launch of 24-hour won trading. Semiconductor names led price action. Samsung closed at 309500.0 after a 4.18% weekly decline and SK Hynix ended at 2425000.0 after a 7.72% drop, reflecting profit-taking that triggered circuit breakers earlier in the period. Rates markets signaled tighter conditions. Korea short-term rates held steady while long-term yields climbed, widening the curve and reducing odds of near-term BoK easing relative to prior weeks. External spillovers shaped sentiment. Brent crude ended at 72.13 after a 1.39% weekly decline that offered partial relief on import costs, yet the won still posted a 0.41% net gain against the dollar amid foreign equity outflows. Data sequence confirmed mixed cycle signals. The combination of robust export growth and above-target inflation left the expansion intact but tilted financial conditions tighter through the currency channel, consistent with the prior three weeks of selective resilience.

BoK Watch

Bank of Korea Governor Shin delivered neutral remarks that contained no new forward guidance and left the policy rate unchanged. June inflation at a multi-month high reinforced the case for holding through the next meeting while export strength reduced downside growth risks. OIS curves showed only modest repricing for cuts in coming quarters, with long-term yields rising sharply and signaling reduced expectations for near-term accommodation. The combination of currency intervention and 24-hour trading preparations underscored the BoK’s focus on financial stability alongside the inflation target. Data dependence remains the dominant theme, with upcoming decisions likely to tolerate above-target prints provided export momentum persists.

The Week Ahead

Next week begins with Singapore retail sales and German factory orders on Monday that will inform external demand readings for Korean exporters. Tuesday brings additional European and Asian releases that could influence global risk sentiment and USD/KRW flows. Mid-week data dependence will center on any follow-up BoK commentary and semiconductor pricing trends that affect the rate path into the next policy meeting. Thursday and Friday contain limited domestic prints, shifting focus to U.S. employment and inflation spillovers that have already re-anchored global easing timelines. Markets will monitor whether the 24-hour won trading launch reduces volatility and supports reserve management ahead of upcoming decisions. Consensus expectations point to continued export resilience that could keep BoK OIS pricing tilted toward a hold through coming quarters. The absence of immediate catalysts leaves KOSPI and KRW sensitive to overnight global moves and yen dynamics.

Risks & Themes

Persistent won weakness near multi-year lows raises imported inflation risks that could force the BoK to tolerate higher terminal rates than currently priced. Equity outflows and semiconductor concentration create downside scenarios for growth if AI demand moderates faster than expected. Upside risks center on further export beats that would support the current policy stance and reduce pressure on reserves. Markets appear to underprice the persistence of above-target inflation, leaving OIS curves vulnerable to repricing if harvest and energy effects linger. The launch of 24-hour trading introduces operational risks that could amplify volatility during periods of foreign selling. Overall, the data flow tilts the balance toward tighter financial conditions through the currency channel rather than outright contraction.

Week in Review

Indonesia data shock dominates regional narrative Indonesia’s June inflation exceeded consensus and the prior reading, while the trade balance recorded a deficit against an expected surplus. The combination triggered immediate rupiah pressure, with USD/IDR closing the week at 17,955. JCI fell on July 1 before rebounding the next session and closing the full week 0.94% higher at 5,875.78.

Equity and currency divergence across ASEAN Thailand’s SET index rose 2.12% to 1,611.28 despite the absence of domestic data, supported by baht appreciation. Malaysia’s KLCI gained 0.79% to 1,679.05 and the ringgit strengthened. The Philippines PSEi advanced 0.89% to 6,188.03 while Singapore’s STI added 0.68% to 5,244.29.

External factors and commodity backdrop Brent crude declined 1.39% to 72.13, providing modest relief to energy importers but offering limited support to commodity-linked currencies. Gold rose 4.10% to 4,187.30, reflecting safe-haven demand amid Middle East uncertainty that weighed on regional risk sentiment earlier in the week.

Policy continuity amid external spillovers No rate decisions or forward-guidance changes were delivered by BI, BoT, BNM, BSP, MAS or SBV. Markets therefore carried unchanged OIS pricing for the next policy meetings into the following week. The week’s data flow reinforced the view that domestic inflation and external balances remain the primary drivers of ASEAN rate expectations rather than synchronized global easing.

ASEAN Central Banks Watch

BI responded to the inflation print and trade deficit by intensifying foreign-exchange supervision but left the policy rate unchanged. BoT held its benchmark at 1.00% and continued consultations on stablecoin rules without altering forward guidance. BNM, BSP, MAS and SBV likewise refrained from any adjustments, with reserve-adequacy settings and S$NEER monitoring unchanged. The Indonesia prints lifted near-term BI OIS pricing modestly higher while other ASEAN OIS curves showed negligible shifts, confirming that the data reinforced a hold bias into the next decisions.

The Week Ahead

Philippines June inflation is scheduled for release on July 6 and will set the tone for BSP’s upcoming decision. Singapore retail sales data on July 6 will provide the first read on 2Q consumption momentum relevant to MAS policy calibration. No other high-impact releases are listed for Indonesia, Thailand, Malaysia or Vietnam through July 10. Markets will assess whether the Philippines print alters BSP OIS-implied probabilities for the next meeting. Regional investors will also monitor any follow-through comments from BI on reserve management after last week’s deficit. The absence of central-bank meetings leaves the focus on data implications for the rate path over coming quarters.

Risks & Themes

The Indonesia inflation overshoot raises the possibility of further BI verbal tightening if subsequent prints remain elevated. A weaker-than-expected Philippines inflation outcome could reopen BSP easing expectations that are currently priced out. External dollar strength driven by US data resilience continues to pressure ASEAN currencies and could force additional FX intervention. Equity recovery this week may prove fragile if global risk sentiment deteriorates further on commodity or geopolitical developments. Markets appear to underprice the risk that Indonesia’s trade deficit persists, which would widen current-account concerns into the second half.

Week in Review

Industrial Production Surprise Anchors Growth View Industrial production rose y/y in May, exceeding consensus. The outcome reinforced expectations that domestic momentum will extend into the second half despite external demand pressures. Equity markets advanced, with Nifty 50 rising 1.36% over the week.

External Debt and Liquidity Trends External debt increased, lifting the debt-to-GDP ratio and prompting RBI commentary on reserve coverage. Gold imports declined, easing current-account pressure. Bond inflows followed recent tax adjustments and kept domestic yields stable.

Services Momentum and Forex Position India’s services PMI expanded at a slower pace in June as domestic demand softened, though export orders remained firm. Forex reserves declined, reflecting valuation and intervention effects. The rupee closed the week at 95.20, with RBI dollar sales limiting further depreciation.

Policy Stance Remains Data-Dependent The combination of the IIP beat and RBI warnings on energy shocks left markets pricing the first policy adjustment later. Short-term rates stayed anchored with no liquidity stress visible in overnight markets. The week confirmed resilient domestic activity while highlighting external vulnerabilities that the Reserve Bank of India continues to monitor.

RBI Watch

The Reserve Bank of India held the repo rate unchanged with no MPC meetings scheduled during the week. Its annual report repeatedly flagged India’s exposure to West Asia-driven oil price shocks given high import dependence. Banks’ gross NPAs reached a multi-decadal low, creating room for stronger credit expansion. Markets shifted RBI OIS pricing to show the first adjustment later after the stronger growth prints. No speeches from MPC members occurred, leaving forward guidance unchanged and curves showing limited near-term repricing. The central bank’s emphasis on inflation targeting alongside calibrated liquidity management kept OIS spreads stable around the current policy rate.

The Week Ahead

No major Indian data releases are scheduled for July 06–12, leaving markets focused on global cues. US non-farm payrolls and Treasury yield moves will influence capital-flow expectations and rupee volatility. Traders will watch Brent crude for renewed pressure on imported inflation. RBI’s weekly statistical supplement may provide liquidity signals. OIS curves are expected to remain anchored until fresh domestic prints clarify the growth-inflation balance. External developments in US yields and oil prices will continue to set the tone for rupee intervention patterns ahead of the next policy meeting.

Risks & Themes

The IIP beat reduces near-term downside risks to growth but leaves the Reserve Bank of India more exposed to upside inflation surprises from energy prices. Markets appear to underprice the probability of sustained higher-for-longer policy given resilient equity performance. Forex reserve declines and rupee pressure highlight external-balance sensitivity to US yields and global risk appetite. An upside scenario of continued domestic momentum could keep RBI OIS curves biased toward delayed easing, while renewed oil shocks would tilt risks toward tighter financial conditions through the import channel. The data flow therefore shifts the balance toward monitoring external vulnerabilities rather than anticipating near-term policy relief.

Week in Review

Inflation path shows incremental relief. Turkey's June CPI rose month-on-month and brought the annual rate down from May, confirming sequential softening. Housing and education components continued to exert upward pressure, yet the overall print matched market expectations and avoided any upside surprise that could have complicated the disinflation narrative. Equity markets extended gains amid contained currency pressure. The BIST 100 climbed 1.65% over the five-day period to 14,417.90, supported by daily advances on July 1 and July 2. USD/TRY advanced only 0.38% to 46.79 across the same window, with daily moves remaining limited except for the final session. Commodity and external factors provided modest tailwinds. Brent Crude declined 1.39% to 72.13, extending the disinflationary impulse visible in prior weeks and limiting imported price pressures. EUR/TRY and GBP/TRY posted larger weekly gains of 0.91% and 1.62%, respectively, reflecting broad dollar strength rather than domestic-specific outflows. Data dependence remains the dominant theme. With no CBRT communications or fresh activity releases until the following week, markets absorbed the inflation print as consistent with a gradual cooling trajectory. The absence of consensus misses reinforced the view that domestic demand is absorbing higher borrowing costs without abrupt contraction signals. Gold (TRY) rose 4.1% to 4,187.30, highlighting continued hedging demand even as the equity index advanced.

CBRT Watch

The Central Bank of the Republic of Turkey delivered no speeches, minutes, or rate decisions during the week. June inflation data supplied the sole domestic input for policy assessment and pointed to a continued, albeit slow, decline in the headline rate. CBRT OIS curves showed no material shift in pricing for the next meeting, with markets maintaining expectations for measured adjustments rather than accelerated easing. The drop in annual inflation from May levels supports the current forward guidance that policy will remain data-dependent through coming quarters. External dollar strength kept TRY OIS spreads stable, limiting any immediate repricing of terminal rates. Overall, the week's information flow left the rate path unchanged and reinforced the bank's tolerance for above-target prints to support growth.

The Week Ahead

Industrial Production Year-over-Year for June releases early next week and will provide the first post-CPI gauge of manufacturing momentum. The print will inform whether recent equity gains reflect genuine activity resilience or merely valuation support. Factory Orders and Retail Sales data from peer economies early next week will set the external backdrop against which Turkish exports are assessed. Markets will watch for any signs that global demand is softening faster than domestic inflation, which could alter the balance of risks at the next CBRT decision. OIS curves currently price limited movement through the summer meetings, so a strong Industrial Production outcome could reinforce the hold bias while a downside surprise might reopen modest easing probabilities. The release timing ahead of the following policy meeting makes it a key input for calibrating the pace of any future adjustments. Broader EM data dependence will also influence TRY volatility, with USD/TRY at 46.79 serving as the immediate reference level.

Risks & Themes

The modest inflation deceleration reduces near-term upside risks to the CBRT's terminal rate path but leaves the bank exposed if housing and education components reaccelerate. Equity outperformance on the BIST 100 may embed expectations of faster easing that the data do not yet justify. A weaker-than-expected Industrial Production print could shift OIS pricing toward earlier cuts, while resilience would validate the current higher-for-longer stance. External dollar strength remains the dominant transmission channel, with any further advance in USD/TRY above 46.79 likely to tighten financial conditions faster than domestic policy can offset. Markets appear to underprice the persistence of above-target inflation into coming quarters given the still-elevated annual rate.

Week in Review

Saudi Non-Oil Momentum Holds Equity markets reflected the mixed tone, with MSCI Saudi closing at 37.38 after a 0.05 percent weekly decline while Saudi Aramco ended at 26.10. Brent crude traded 1.39 percent lower week-over-week to 72.13.

UAE Growth Pulse Softens DFM General index advanced 1.1 percent over the week to 6059.14, supported by selective buying in real estate and financial names. MSCI UAE finished at 19.02, down 0.89 percent from the prior Friday close.

Regional Equity and Currency Snapshot MSCI Qatar declined 0.19 percent to 17.97 while MSCI Kuwait eased 0.27 percent to 36.49, leaving GCC equities broadly flat to slightly lower amid lower oil prices. USD/SAR rose 3.01 percent week-over-week to 3.75, USD/AED held near 3.67, and USD/KWD declined 0.39 percent to 0.31, keeping peg stability intact. Gold’s 4.1 percent advance to 4187.3 provided an additional external buffer for regional portfolios.

Data Confirmation of Prior Trends The week’s limited releases produced no consensus misses in the sparse GCC calendar. No material surprises emerged relative to recent baselines, confirming expectations that domestic demand rather than energy prices would drive the near-term growth narrative.

GCC Central Banks Watch

GCC central banks left policy rates unchanged through the week, with no speeches or minutes released that altered forward guidance. OIS curves for the GCC CBs showed negligible shifts, maintaining the pricing of steady settings into the next decision round. Lower Brent levels at 72.13 reinforced the external disinflation channel but did not prompt any adjustment in rate-path expectations given the currency pegs. The data flow therefore leaves the GCC policy stance aligned with the higher-for-longer global tone observed in prior weeks.

The Week Ahead

Monday brings Singapore retail sales data that will provide an early read on Asian demand relevant to GCC exports. Tuesday features German factory orders, which could influence euro-area growth signals and indirectly affect GCC trade balances. Mid-week releases include Danish manufacturing production and additional euro-area indicators that markets will parse for any spillover to energy demand. Later in the period, focus will turn to whether upcoming global inflation prints alter the terminal-rate outlook priced into GCC CBs OIS curves. The absence of direct GCC releases means attention will remain on how external activity data shapes the path for the next policy meetings and coming quarters.

Risks & Themes

Continued oil-price softness below 72 risks further downside pressure on fiscal balances if the decline extends into the next quarter. Conversely, any rebound in Brent would support activity readings and reduce the need for additional fiscal support measures. Markets appear to underprice the persistence of US data resilience and its implications for dollar strength, which could tighten GCC financial conditions through the peg channel in coming quarters.