Week in Review

CPI surprise reshapes inflation narrative. June headline CPI slowed year-over-year against consensus and the prior reading, while core CPI eased further. The monthly core print came in below expectations, confirming faster underlying disinflation than markets had priced. ADP employment change registered modestly below the prior print yet still consistent with labor-market resilience. The June budget deficit narrowed versus consensus, reflecting stronger customs receipts and steady fiscal inflows.

Oil-driven tightening offsets disinflation signal. WTI crude advanced 4.66% to close at 81.78, reversing earlier relief and re-anchoring yields higher across the curve. The 10-year Treasury yield finished the week higher. Equity indices absorbed the move with mixed daily reactions, as the S&P 500 posted a net 0.77% weekly decline to 7,457.69. The Nasdaq 100 fell 2.29% to 28,592.66, highlighting growth-sensitive sector pressure amid higher energy costs.

Fed speakers reinforce data dependence. Chair Warsh testified on inflation measurement challenges and the balance-sheet path, while Governor Waller stressed vigilance on price stability. No senior official signaled an imminent policy adjustment, leaving OIS curves anchored around the current policy rate. Retail-sales resilience and the narrower budget gap supported the view that domestic demand continues to absorb higher borrowing costs without immediate contraction. Markets therefore enter the final week of July with clearer evidence that above-target inflation, now reinforced by energy prices, will continue to shape the rate path.

Fed Watch

Fed Chair Warsh testified before the House Financial Services Committee on inflation measurement challenges and the balance-sheet trajectory, offering no explicit forward guidance on timing. Governor Waller emphasized continued vigilance on price stability in separate remarks, reinforcing the data-dependent stance. Governor Bowman and other speakers delivered medium-impact comments with no material shift in the policy outlook. The softer June CPI print prompted modest repricing in OIS curves, yet markets still place the first cut no earlier than mid-2027. Multiple Fed voices highlighted the need to monitor energy-driven inflation risks before any adjustment. The combination of resilient activity data and the CPI surprise leaves the medium-term rate path tilted toward patience rather than near-term easing.

Data Review

June CPI headline inflation slowed year-over-year from the prior reading and beat consensus by a wide margin. Core CPI year-over-year printed below expectations, while the monthly core rate came in below consensus. ADP employment change printed slightly softer than the prior reading but still indicative of steady hiring momentum. The June budget deficit narrowed, beating forecast and easing near-term fiscal pressure. Industrial production and Empire State manufacturing data released alongside the inflation prints showed mixed but non-contractionary readings. These outcomes collectively point to a mid-expansion phase in which above-target inflation persists yet growth absorbs higher rates without immediate slowdown. The data therefore tilt the medium-term Fed rate path modestly higher than pre-week pricing, with OIS curves showing limited near-term easing probabilities.

The Week Ahead

Tuesday brings ADP employment change and API crude oil stocks, providing an early read on labor momentum and energy inventories ahead of the PMI prints. Wednesday features the MBA 30-year mortgage rate and EIA crude and gasoline inventory releases, which will test whether the recent oil surge is feeding through to consumer costs. Thursday highlights the Chicago Fed National Activity Index and weekly jobless claims, offering a timely gauge of labor-market slack. Friday delivers the S&P Global Composite, Manufacturing, and Services PMI Flash reports with consensus expectations centered on continued expansion readings. New home sales are also due Friday. These releases will inform whether the disinflation signal from June CPI persists into late July or whether energy prices begin to re-anchor inflation expectations. Fed speakers are scheduled throughout the week, maintaining the data-dependent narrative.

Risks & Themes

The oil surge to 81.78 introduces upside inflation risk that could delay any OIS-implied easing if sustained. Equity positioning appears crowded in growth sectors, as evidenced by the Nasdaq 100’s 2.29% weekly decline, raising the potential for further rotation into value and small-caps. Volatility remains contained yet could rise if upcoming PMI prints disappoint. Market mispricing signals center on the gap between the CPI downside surprise and the limited repricing in 10-year yields, which closed higher. Upside scenarios include continued labor resilience supporting above-trend growth, while downside risks hinge on housing data showing renewed sensitivity to elevated mortgage rates. Flow considerations favor selective commodity exposure given the week’s 4.66% WTI advance.

Cross-Asset

Equities closed the week lower with the S&P 500 at 7,457.69 for a 0.77% decline and the Nasdaq 100 at 28,592.66 for a 2.29% drop, driven by the oil surge and mixed daily reactions to the CPI print. The Dow Jones finished at 52,146.42, down 0.67%, while the Russell 2000 edged up 0.31% to 2,962.22 on relative value rotation. Ten-year Treasury yields rose from the prior week, with the 2-year note closing after intraday volatility around the inflation release. USD/JPY advanced 0.33% to 162.41, reflecting modest dollar strength, while EUR/USD held at 1.14 and GBP/USD finished at 1.35. WTI crude posted the standout move, rising 4.66% to 81.78 on geopolitical supply concerns, while gold advanced 0.55% to 4,018.80. Bitcoin gained 1.13% to 64,477.40 amid risk-on flows later in the week.

Global Context

Brent crude strength in prior weeks spilled over into US energy prices, tightening financial conditions through the rates channel. Euro-area data showed German factory orders rising month-over-month, yet European equities declined while Bund yields moved higher, illustrating limited spillovers from the US CPI surprise. Japan’s household spending supported gradual BoJ normalisation, keeping USD/JPY near 162.41 and limiting yen-driven pressure on US yields. Emerging-market outcomes split along commodity lines, with Brazil IPCA easing and supporting Selic-cut odds while Mexico inflation moderation allowed Banxico to hold steady. China’s persistent domestic demand weakness contrasted with export-driven input cost pressures, leaving the dollar channel as the dominant cross-border transmission mechanism.

Week in Review

German price data drove the narrative arc. German wholesale prices fell more than expected, extending the disinflation signal already visible in the June Eurozone CPI print. The year-over-year rate eased further, reinforcing that input-cost pressures remain contained despite the Brent surge.

Southern sentiment diverged from core weakness. Spanish consumer confidence improved while Dutch unemployment edged lower, pointing to resilient household optimism in peripheral economies. These prints arrived alongside Italy’s trade surplus holding steady, offering limited offset to the German wholesale miss.

Markets priced the data into tighter financial conditions. Euro Stoxx 50 closed the week at 6230.87 after a 0.64% decline while the DAX fell 1.13% to 24830.98. German 10-year Bund yields rose as OIS markets scaled back near-term cut probabilities. EUR/USD held at 1.14 with only a 0.23% weekly gain, reflecting dollar resilience tied to the oil impulse.

Oil volatility shaped cross-border flows. Brent crude advanced 5.76% to 88.10 on supply concerns, reversing earlier relief and feeding directly into Bund curves.

ECB Watch

No Governing Council members spoke during the week, leaving forward guidance anchored around the unchanged 2.25% deposit rate. OIS curves showed only marginal repricing after the German wholesale-price miss, with the first cut still discounted beyond the next two meetings. The softer pipeline data reinforced the medium-term outlook that inflation convergence remains on track without requiring immediate policy adjustment. Prior-week comments from national central banks continued to emphasize data dependence, consistent with the July 12 statement that kept options open. Market pricing for the deposit rate path stayed aligned with the June Eurozone CPI trajectory of 2.80% year-over-year. The absence of rhetoric allowed incoming hard data to dominate price action in Bunds and the euro. Overall, the week’s releases supported the ECB’s patient stance without altering the expected gradual normalization trajectory.

Data Review

German wholesale prices delivered the clearest downside surprise of the week, contracting more than expected while the year-over-year rate fell further. The miss reinforced the June Eurozone CPI reading and the stable unemployment rate, indicating that pipeline pressures are not feeding through to final prices. Spanish consumer confidence rose sharply, signaling improved household sentiment that could support Q3 consumption in the periphery. Dutch unemployment declined, keeping wage pressures visible in the tightest labor market of the bloc. Italian trade data showed a steady surplus, consistent with external demand holding up amid softer domestic orders. These releases together suggest the euro-area cycle remains in mid-expansion with disinflation intact but uneven across member states. The German price weakness points to a slower convergence of core inflation toward target, supporting a gradual rather than front-loaded ECB easing path. Market-implied deposit-rate expectations shifted only modestly lower after the prints, preserving the data-dependent stance articulated in prior Governing Council communications.

The Week Ahead

Monday brings German producer prices year-over-year at 02:00 ET with the prior reading at 2.2%, offering the first update on pipeline trends after the wholesale-price miss. Tuesday features the German ZEW Economic Sentiment Index at 05:00 ET, which will test whether business optimism has recovered from the price weakness. Wednesday includes the Netherlands consumer confidence print and French business confidence at 02:45 ET, both carrying medium impact for sentiment tracking. Thursday delivers the German GfK consumer confidence index at 02:00 ET alongside French and German S&P Global flash PMIs at 03:15 ET and 03:30 ET. The manufacturing and services flashes will provide the first look at July activity momentum ahead of the August ECB meeting. Markets will watch for any revisions to prior PMI levels and whether the German services reading holds steady. Central-bank speakers remain light, keeping focus on the data flow.

Risks & Themes

The German wholesale-price miss reduces downside risks to the inflation outlook but leaves upside risks from Brent at 88.10 intact. Positioning in OIS markets appears light on near-term cuts, suggesting limited scope for further repricing unless July PMIs disappoint materially. Volatility remains contained with the Euro Stoxx 50 daily moves under 1%, yet a stronger-than-expected ZEW print could trigger short-covering in Bunds. Flow data from the prior week showed continued selling in German equities, raising the possibility of further underperformance if oil sustains elevated. Downside scenarios center on a sharper contraction in German manufacturing PMIs, while upside hinges on Spanish and French sentiment prints extending the peripheral resilience. Overall positioning favors caution ahead of the flash PMIs.

Cross-Asset

Euro Stoxx 50 declined 0.64% to 6230.87 while the DAX fell 1.13% to 24830.98 and the CAC 40 eased 0.31% to 8338.81, reflecting modest equity underperformance amid the oil-driven rates repricing. German 10-year Bund yields rose as the curve steepened in response to the Brent advance. EUR/USD gained 0.23% to 1.14 while EUR/JPY advanced 0.52% to 185.58, showing limited euro strength against a firmer dollar. Brent crude posted the standout move, rising 5.76% to 88.10 on supply concerns that reversed the prior week’s relief. Gold advanced 0.55% to 4018.80, providing a partial hedge within the commodity complex.

Global Context

Brent crude strength at 88.10 echoed the prior week’s gain, tightening financial conditions across developed markets through the rates channel. US data resilience continued to anchor global cycle expectations, with the S&P 500 closing higher after a weekly gain. Ten-year Treasury yields rose, extending the steepening observed since late June. The euro-area response remained muted, with EUR/USD holding at 1.14 amid the dollar’s commodity-linked bid. Geopolitical supply concerns around Brent provided the dominant cross-border spillover into Eurozone curves over the past seven days.

Week in Review

Machinery Orders Disappointment Capital spending data delivered a clear downside surprise that reshaped the week’s growth narrative. Orders contracted sharply on both a month-over-month and year-over-year basis. The miss followed prior gains and highlighted fragile business investment after earlier strength.

Equity and Yield Dynamics Equity markets reflected the mixed signals. The Nikkei 225 closed the period down 4.61% for the week. The 10-year JGB yield advanced while the 2-year yield climbed, extending the steepening observed in prior weeks.

Currency and Policy Context USD/JPY closed at 162.41 for a modest 0.33% weekly gain. Government statements reaffirmed Bank of Japan independence after media reports raised autonomy questions, yet the yen remained near multi-decade lows. Household inflation expectations reached elevated readings, reinforcing the case for measured policy adjustment.

Cross-Asset Influences Brent crude rose 5.76% while gold advanced 0.55%. The data flow therefore confirmed softening domestic demand signals without derailing the broader normalization path priced into BoJ OIS curves.

BoJ Watch

No Bank of Japan speakers appeared during the week, leaving markets to interpret the machinery-orders miss against the policy rate. Government officials inserted an explicit autonomy clause into the latest economic blueprint, calming near-term independence concerns that had lifted yields. Household inflation expectations at elevated levels added weight to the gradual-adjustment case. BoJ OIS pricing showed only modest shifts toward additional tightening, consistent with data-dependent language that tolerates above-target prints to support growth. The 2-year yield’s move reflected front-end repricing while longer yields extended their climb.

The Week Ahead

Trade Balance and Exports Year-over-Year prints will provide the first high-impact read on external demand. Inflation Rate Year-over-Year and Core Inflation Rate Year-over-Year releases will test whether price pressures are re-accelerating, directly informing the Bank of Japan’s upcoming decisions. S&P Global Manufacturing PMI Flash and Services PMI Flash will offer early signals on private-sector momentum into the next meeting. These releases matter because sustained above-target inflation combined with softening capital expenditure could tilt BoJ OIS curves toward a slower pace of adjustment over coming quarters. Markets will watch for any subtle shifts in language around the policy rate.

Risks & Themes

The machinery-orders miss raises downside risks to second-half growth while yen weakness continues to import inflation and test export margins. Household inflation expectations at elevated levels could force faster BoJ normalization than currently priced, yet the government’s independence pledge has reduced near-term political risk. Markets appear to underprice the probability of further 10-year JGB yield increases if core inflation prints exceed expectations. Upside scenarios center on resilient trade data supporting the gradual-adjustment path; downside scenarios hinge on further capital-spending weakness feeding into softer PMI prints and delayed BoJ moves.

Week in Review

Commodity Impulse Lifts CAD WTI Crude and Brent Crude advanced, delivering weekly gains that strengthened the Canadian dollar, with USD/CAD declining.

Equity Response The S&P/TSX Composite finished with a modest weekly gain as energy shares advanced.

BoC Watch

The Bank of Canada held the policy rate and used the Monetary Policy Report to signal stronger second-half expansion, citing renewed momentum in output. The upgraded staff projections tempered market-implied probabilities of cuts before the next meeting, leaving BoC OIS curves showing only limited near-term repricing. Firming oil prices reinforced the committee’s tolerance for above-target inflation prints to support growth. Markets now price fewer cuts by year-end than before the decision, consistent with the broader global shift toward later easing across developed-market central banks.

The Week Ahead

Monday’s Inflation Rate Year-over-Year release will provide the first high-impact read on price pressures and directly inform the Bank of Canada’s assessment of the rate path. Core Inflation Rate Year-over-Year and Inflation Rate Month-over-Month data due the same day will clarify whether recent energy strength is feeding into underlying measures. Thursday’s Retail Sales Excluding Autos Month-over-Month and Retail Sales Month-over-Month prints will offer an early signal on consumer resilience ahead of upcoming decisions. Friday’s New Housing Price Index Month-over-Month will update views on residential momentum. These releases collectively shape expectations for the timing of any adjustment at the next meeting by testing whether growth upgrades can coexist with still-elevated inflation. Stronger-than-consensus inflation would further delay easing probabilities in BoC OIS, while softer retail sales could reintroduce downside risks to the growth outlook.

Risks & Themes

Oil volatility remains the dominant swing factor, with Brent Crude and WTI Crude already lifting CAD and financial conditions; further supply-driven spikes could tighten conditions more than the Bank of Canada currently projects. Housing affordability concerns persist despite the policy hold, as structural supply shortages limit the impact of lower short-term yields on major-city prices. Upside growth surprises in the second half could keep the Bank of Canada on hold longer than markets currently price, while downside retail sales prints would reopen the door to earlier easing. Markets appear to underprice the persistence of above-target inflation when combined with upgraded growth projections, leaving BoC OIS vulnerable to repricing on Monday’s inflation data.

Week in Review

Equity and FX Performance Mexico equities advanced as the IPC Bolsa rose 1.0% to close at 66,634.23. USD/MXN ended the week 0.14% higher at 17.52. The peso drew support from external commodity strength.

Commodity and Yield Drivers WTI crude climbed 4.66% to 81.78 while Brent crude gained 5.76% to 88.1, reinforcing Mexico’s external accounts through energy linkages. Gold rose 0.55% while silver fell 2.27%. Remittance inflows and nearshoring-related FDI continued to underpin sentiment in the absence of INEGI releases.

Inflation and Policy Backdrop No Banxico speakers or survey releases occurred during the week, so market positioning reflected external drivers. The data flow therefore confirmed expectations of a steady policy stance into the next decision round.

Banxico Watch

Banxico maintained its data-dependent stance with no communications or minutes released during the week. Market participants continue to price gradual adjustment only after further confirmation of disinflation in coming quarters. Higher oil prices added a modest upside bias to fiscal revenues but did not alter the forward guidance on the rate path.

The Week Ahead

The calendar points to a quiet start with no high-impact Mexican releases scheduled for Monday. Attention will turn to any updates on USMCA consultations and northern Mexico FDI trends that could influence peso flows. Global oil price action and US Treasury yield movements remain the primary external variables for MXN volatility. Equity desks will monitor IPC Bolsa technical levels after the weekly gain. Cross-border supply-chain developments under USMCA and any follow-up remarks from Banxico officials will shape expectations for the upcoming decision.

Risks & Themes

Stronger oil prices have tightened financial conditions through the rates channel while supporting the external balance. Upside scenarios center on sustained nearshoring inflows and continued USMCA stability that could extend peso resilience. Downside risks include any escalation in US tariff concerns tied to Chinese truck imports or renewed global shipping disruptions. Markets appear to underprice the potential for curve steepening to persist if long-term yields remain elevated. The data therefore tilt the balance toward a cautious hold at Banxico until clearer signals emerge on both domestic demand and external demand.

Week in Review

Inflation trends moderating The latest IPCA print came in softer than expected and reinforced the disinflation path. The release lifted market-implied probabilities of easing at the next COPOM decision and pushed short-term rates lower on the initial reaction.

Equity and FX response to data Bovespa rose while USD/BRL eased, reflecting reduced inflation risk premia and firmer commodity exporter valuations. Vale and Petrobras advanced on the initial move.

Tariff shock and reversal US confirmation of 25% tariffs on most Brazilian imports triggered a swift reversal, with Bovespa declining on Tuesday and further on Thursday to close at 173,714. USD/BRL stabilised at 5.11 after an intraday spike, illustrating the external-demand risk now priced into the real.

Activity indicators and confidence Business Confidence Index remained directionless with no usable print, while manufacturers’ confidence hit its lowest level since the pandemic, signalling that domestic demand momentum may be fading. Retail Sales are still expected to rebound from the prior contraction, but the tariff overlay has clouded the growth outlook.

Commodity overlay WTI Crude’s 4.66% weekly gain to 81.78 supported Petrobras (+0.50% wow) yet failed to offset broader equity weakness, highlighting the split between energy and non-energy sectors.

Fiscal and policy backdrop The 0.5% of GDP primary deficit target stayed unchanged, with the Treasury’s June surplus narrowing the 12-month gap to 0.8% of GDP and limiting any additional fiscal impulse ahead of upcoming decisions.

BCB Watch

No COPOM speakers or minutes were released during the week, leaving the latest IPCA print as the sole domestic driver of rate expectations. The outcome reinforced the case for easing at the next meeting, yet BCB OIS curves shifted only modestly lower, with the short-term rate closing at 14.39%. Market pricing continues to embed a cautious path that tolerates above-target inflation while monitoring external tariff effects on the current account. The data therefore suggest limited near-term repricing until fresh activity prints confirm whether the early-2026 rebound is intact.

The Week Ahead

Retail Sales MoM due early in the period will test whether consumer demand has stabilised after the prior contraction, with the print carrying direct implications for the growth component of the BCB reaction function. German and euro-area PPI releases will shape global commodity and input-cost signals that feed into Brazilian inflation dynamics. Broader trade and export data from Asia will influence iron-ore and soy flows, altering the current-account outlook that the Banco Central do Brasil weighs at upcoming decisions. Any follow-through commentary from Brasília on the 25% US tariff measure could shift BRL volatility and OIS pricing ahead of the next meeting. Markets will also monitor electricity consumption and agribusiness output trends for evidence that the 2026 growth forecast remains on track.

Risks & Themes

The 25% tariff announcement introduces a clear downside scenario for exports and growth that markets have only partially priced, risking an earlier pause in the easing cycle if the current-account balance deteriorates. Oil strength at 81.78 supports the fiscal accounts yet could re-anchor inflation expectations higher if sustained, challenging the dovish tilt from the latest IPCA print. BCB OIS curves appear to underprice the external shock relative to equity and FX moves, leaving room for further steepening if activity data disappoint. Upside risks centre on a firm retail sales beat that would validate the moderate-growth narrative and allow additional cuts without fiscal slippage concerns.

Week in Review

Inflation Disinflation Path Argentine annual inflation cooled through May, marking the lowest level in several months and extending the three-month deceleration trend. The subsequent print further anchored expectations for contained price pressures, with private wage settlements showing moderation. This sequence reduced immediate pass-through risks to import costs and supported positive real returns on peso assets.

Equity and Currency Market Moves The MERVAL index posted a net 1.09% weekly decline to close at 3199935.0. USD/ARS eased 0.92% over the week to 1478.0. EUR/ARS rose 2.44% to 1690.76, reflecting external euro strength rather than local depreciation pressure.

Commodity and External Account Support Brent crude climbed 5.76% to 88.1, lifting fiscal receipts from energy exports and providing offset to soybean futures that ended at 1203.0 for a modest 0.08% weekly gain. Export-tax collections continued to outperform budget targets, reinforcing primary surplus efforts under the IMF arrangement.

Reserve and Liquidity Dynamics BCRA weekly reserve updates and money-market aggregates released mid-week showed continued accumulation anchored by soybean export proceeds, with no signs of accelerated intervention. Thin trading volumes amplified modest moves in official and parallel exchange rates but did not trigger liquidity stress.

Fiscal Consolidation Signal The primary surplus target for 2026 remained on track following recent outperformance, freeing limited fiscal space while indexed spending pressures eased with lower inflation prints.

BCRA Watch

The Central Bank of Argentina held its policy rate unchanged with no scheduled decisions or minutes released during the week. Recent CPI prints reinforced the case for a steady stance into the next meeting, keeping real returns on peso instruments positive. BCRA OIS curves showed only marginal shifts, with market-implied probabilities of near-term easing remaining low. Forward guidance stayed data-dependent, focused on reserve accumulation and inflation trajectory rather than explicit rate signals. The absence of new speakers or aggregate surprises left the rate path anchored to the current level through coming quarters.

The Week Ahead

Monday opens with Malaysia trade data and German producer prices that could influence global commodity sentiment feeding into Argentine export revenues. Tuesday features additional German PPI prints alongside Saudi real-estate indices, setting the tone for energy-linked fiscal flows. Mid-week attention turns to any BCRA weekly reserve releases and Treasury debt auctions testing demand for dual-currency instruments. Industrial production and construction figures due later in the period will provide the first real-economy read after the latest CPI slowdown. Markets will also monitor soybean export registrations and any IMF Article IV updates that could affect disbursement timing. These releases matter for the Central Bank of Argentina rate path because stronger external balances and contained inflation prints would preserve room for gradual easing in upcoming decisions while weaker data could delay repricing in BCRA OIS curves.

Risks & Themes

Upside risks center on sustained Brent strength that could accelerate reserve gains and further narrow the USD/ARS gap, potentially allowing earlier BCRA OIS easing than currently priced. Downside scenarios include renewed soybean price weakness or external EM volatility that widens parallel-rate spreads and pressures fiscal receipts. The market appears to underprice the persistence of disinflation momentum, as consecutive months of cooling prints have not yet translated into material OIS shifts. Global oil impulses and IMF compliance checks remain the dominant external variables that could alter the domestic rate outlook over coming quarters.

Week in Review

Commodity price volatility dominates regional flows. Brent crude advanced over the seven days, providing incremental fiscal support to Colombia while copper climbed and lifted mining revenues in Chile and Peru. MSCI Chile posted a net decline after intraday swings. MSCI Peru fell, with the largest single-day move coinciding with the Peru growth print.

Peru activity data disappointed. External accounts remained reliant on copper export values. USD/PEN rose across the week, the largest depreciation in the bloc, while USD/CLP gained and USD/COP eased.

Central bank policy remained on hold. No fresh forward guidance released. Gold moved higher, offering limited offset to Peru’s external balance sheet. The data flow confirmed commodity sensitivity rather than domestic demand strength as the primary driver of asset prices.

Equity and currency divergence widened. MSCI Colombia held flat while Chile and Peru equities closed lower, illustrating Colombia’s relative insulation via Brent strength versus the copper-linked economies. Daily moves showed USD/COP falling before rebounding, underscoring two-way FX pressure absent local data releases.

Andean Central Banks Watch

No BanRep action or minutes altered the hawkish tilt observed in prior weeks. The absence of fresh inflation or activity prints left BanRep, BCCh and BCRP OIS curves stable, showing no material shift in the expected timing of upcoming decisions. Copper and Brent reinforced the external-balance channel that central banks have cited as supporting gradual normalization. Forward guidance remained data-dependent, with BCRP continuing to judge the recent inflation spike temporary. Market pricing therefore continues to embed limited near-term easing across the three banks into coming quarters.

The Week Ahead

The calendar for July 20-24 contains no scheduled releases for Colombia, Chile or Peru, leaving external commodity prices and global risk sentiment as the dominant drivers. Copper and Brent trajectories will directly influence fiscal royalty collections in Chile and Peru plus Colombia’s current-account dynamics ahead of the next BanRep, BCCh and BCRP decisions. Any sustained move in copper above recent highs should support CLP and PEN valuations while narrowing projected fiscal gaps. Market participants will also monitor Chinese demand indicators for spillovers into Andean mining revenues. BanRep board minutes due shortly may clarify the persistence of its policy stance, while BCCh minutes and a Chilean 10-year bond auction are expected within the period. BCRP reserve management activity could increase if PEN volatility persists. The data dependence articulated by all three central banks implies that commodity-driven external balances will remain central to rate-path assessments into the second half of the year.

Risks & Themes

Higher Brent levels reduce near-term fiscal pressure on Colombia but leave the peso exposed to seasonal import demand and political uncertainty that could widen current-account gaps. Peru’s growth miss raises downside risks to the BCRP’s inflation outlook if fishing and manufacturing weakness persists, potentially delaying any future easing. Copper offers upside to Chile and Peru royalties yet remains vulnerable to Chinese demand shortfalls that could reverse recent equity gains. Market pricing appears to underweight the persistence of commodity volatility, leaving BanRep, BCCh and BCRP OIS curves exposed to repricing if external balances deteriorate faster than expected. The week’s data therefore tilts the balance toward external rather than domestic drivers shaping the rate outlook.

Week in Review

UK markets absorbed a clear domestic demand miss alongside hawkish central-bank rhetoric during the week of July 13-19, 2026. Retail sales signal softening household spending. The BRC Retail Sales Monitor fell from the prior reading, missing consensus by a wide margin and extending the slowdown already visible in June. This print aligned with earlier mortgage approvals data at multi-year lows and reinforced the low-growth narrative that Governor Bailey identified as Britain’s central challenge. BoE communication shifts market pricing. Deputy Governor Pill stated that interest rates will need to rise to address persistent pressures, while Bailey reiterated data dependence without opening the door to near-term easing. Markets responded by trimming BoE OIS cut probabilities and pushing two-year gilt yields to one-month highs. Energy prices re-anchor financial conditions. Brent crude climbed on the week and feeding directly into gilt curves before the 10-year yield closed higher. Sterling posted net gains, with GBP/USD rising and GBP/JPY advancing. Equity indices reflected resilience rather than outright contraction, as the FTSE 100 closed after a weekly gain. The through-line remains one of above-target inflation and subdued domestic demand keeping the Bank of England on hold longer than some OIS curves had priced earlier in July.

BoE Watch

Governor Bailey and Deputy Governor Pill both spoke during the week, maintaining a hawkish tone around the Bank Rate. Pill stated that interest rates will need to rise to address persistent pressures, while Bailey highlighted low economic growth as the central challenge facing the UK. Markets parsed the remarks as consistent with data dependence and no near-term easing bias. OIS curves showed limited repricing after the speeches, keeping the first cut priced further out. The BRC retail sales miss reinforced the Bank’s focus on subdued domestic demand without altering the medium-term rate path. Unemployment and CPI remain the key anchors for future decisions. Forward guidance continues to emphasize tolerance for above-target inflation to support growth.

Data Review

The dominant release was the BRC Retail Sales Monitor, which missed consensus and the prior reading. This shortfall confirmed weaker consumer demand amid elevated energy costs. No GDP month-over-month or industrial production prints were released despite earlier scheduling, leaving the consensus forecast for June untested. Unemployment and CPI entering the period remained consistent with the prevailing Bank Rate level. The retail sales shortfall aligns with the services PMI contraction observed in prior weeks and points to growth near stall speed. Markets interpreted the data as reinforcing the BoE’s growth concerns without shifting the medium-term rate path materially lower. Core inflation continues to anchor expectations that any easing remains conditional on further disinflation. The combination of soft activity and sticky prices keeps the Bank of England’s reaction function data-dependent into the second half of 2026.

The Week Ahead

Tuesday brings the headline unemployment rate alongside average earnings growth. Wednesday features CPI year-over-year, with core inflation seen lower. Thursday includes the CBI Business Optimism Index and industrial trends orders. Friday delivers retail sales month-over-month and the S&P Global Manufacturing PMI Flash. These releases will test whether the recent services slowdown persists and whether labor-market resilience continues to support the BoE’s hold stance. Any downside surprise in CPI or retail sales could shift BoE OIS pricing, while stronger earnings would reinforce hawkish rhetoric. Global energy developments will also influence gilt curves and sterling crosses.

Risks & Themes

The retail sales miss increases downside risks to near-term growth while the Brent surge adds upside pressure to inflation. Positioning in front-end gilts remains light after the hawkish speeches, leaving room for volatility around Tuesday’s labor data. Market mispricing appears concentrated in the timing of the first BoE cut, with OIS curves still showing limited movement despite the BRC print. Upside scenario centers on resilient earnings supporting sterling. Downside scenario involves further contraction in PMI prints next week that could flatten the gilt curve. Flow considerations favor GBP longs on energy strength but caution against over-positioning ahead of the inflation release.

Cross-Asset

Equities posted modest net gains while energy prices drove fixed-income and FX moves. The FTSE 100 rose and the FTSE 250 advanced. Daily action showed the index climbing before closing the week higher. UK 10-year gilt yields ended higher after an initial climb on the BRC miss and hawkish speeches. GBP/USD gained with a standout daily advance. Brent crude surged, its largest weekly move since early July, while gold rose. UK natural gas edged higher. The commodity impulse fed directly into sterling strength and limited downside in equities despite the retail sales disappointment.

Global Context

Brent crude’s weekly gain reflected ongoing supply concerns that spilled directly into UK energy costs and gilt yields. US activity resilience noted in prior weeks continues to shape global rate expectations, keeping developed-market central banks data-dependent. Euro-area factory orders showed stabilization while German yields moved higher, adding to the cross-border pressure on UK curves. Trade balance data from earlier in July indicated narrower deficits that could support sterling if energy prices remain elevated. Geopolitical tensions around oil supply remain the dominant external factor for UK inflation and growth outlooks over the next seven days.

Week in Review

Oil-driven divergence in equity and currency performance Nordic equity indices closed the week mixed as Brent crude advanced, delivering a 5.76% gain that directly benefited energy-exposed names. Oslo Bors rose 0.34% to 1957.31 while OMX Stockholm 30 fell 0.64% to 3146.94 and OMX Helsinki 25 declined 0.14% to 6174.83. The OMX Copenhagen 25 gained 0.71% to 1901.97, reflecting euro-area flows transmitted through the Danish peg. USD/NOK fell 1.48% to 9.64 as higher oil prices supported the krone, whereas USD/SEK declined 0.42% to 9.64 amid thinner domestic drivers.

Inflation relief in Norway versus contained Swedish price pressures Norway’s underlying CPI print cooled, reducing immediate rate-hike pressure on Norges Bank and allowing markets to trim tightening probabilities. Sweden’s June CPI remained contained year-over-year, underscoring price pressures that continue to support Riksbank easing considerations into coming quarters. No tier-1 releases occurred in Denmark or Finland, leaving local sentiment anchored to euro-area developments and the EUR/DKK peg.

Yield and fiscal balance shifts amid external oil volatility Sweden 10-year government yields rose while Norway 10-year yields eased. The widening oil-linked support for Norway’s fiscal transfers contrasted with Sweden’s more muted response, highlighting divergent rate-path sensitivities. EUR/NOK fell 1.11% to 11.03 over the week, consistent with the broader NOK strength.

Limited domestic data flow reinforces external-driver narrative The Nordic calendar recorded no major CPI, GDP or labour-market prints across the four countries. Market moves therefore reflected Brent volatility tied to external factors and broader activity resilience. Export-oriented manufacturers in Sweden and Denmark continued to face headwinds from subdued global demand signals, while Danish covered-bond spreads tracked ECB sentiment through the currency peg.

Nordic Central Banks Watch

Riksbank certificate sales and Norges Bank disclosures occurred without altering policy signals, leaving OIS curves anchored to data dependence. Norway’s core inflation cooling reduced near-term tightening odds priced into Norges Bank OIS, while Sweden’s June CPI reading kept Riksbank easing expectations intact. Danmarks Nationalbank and Bank of Finland (ECB) transmitted euro-area flows with no local deviations, as EUR/DKK remained stable and Finnish yields tracked Bund moves. The oil-driven NOK support produced only modest shifts in Norges Bank OIS pricing, consistent with the limited near-term repricing observed across DM curves after the data flow.

The Week Ahead

Monday opens with German producer price index prints that will inform euro-area input-cost pressures relevant to Bank of Finland (ECB) and Danmarks Nationalbank decisions. Tuesday features limited Nordic-specific releases, directing attention to any follow-through from external manufacturing data that could affect Swedish and Danish export sectors. Wednesday’s calendar remains thin domestically, keeping focus on oil-price momentum and its direct implications for Norges Bank fiscal and rate-path assessments. Thursday may bring Swedish housing or retail figures that test domestic demand recovery ahead of the next Riksbank meeting. Friday closes the week with potential euro-area sentiment indicators that feed into OIS pricing for all four central banks. Markets will monitor whether the recent Brent advance to 88.1 sustains NOK support or reverses, altering Norges Bank OIS expectations relative to Riksbank curves. Overall, the external-heavy schedule suggests limited local volatility unless global oil or ECB signals intensify.

Risks & Themes

The sharp Brent rebound introduces upside risk to Norway’s external accounts but downside risk to euro-area growth that could pressure Swedish and Danish exporters. Persistent services inflation across the Nordics may keep central banks tolerant of above-target prints and limit aggressive OIS repricing. Market mispricing appears concentrated in Norges Bank curves, where the core inflation print may have been under-weighted relative to oil strength. Upside scenarios include sustained Brent levels supporting further NOK gains and fiscal transfers, while downside scenarios centre on a reversal in oil that re-exposes NOK depreciation pressure and delays Norges Bank adjustments.

Week in Review

Romanian inflation beat reinforces hold path. Romanian July inflation delivered a clear moderation, with the month-over-month rate at 0.1% and the year-over-year print at 10.4% versus 10.6% consensus. The outcome signals cooling price pressures and keeps the BNR on a cautious hold trajectory. Poland’s disinflation path remained intact, containing EUR/PLN near recent levels and supporting consumption through real wage gains.

Hungary external buffers limit volatility. Hungary FX reserves reached record levels in May, providing room for the MNB to tolerate modest forint movement. EUR/HUF rose 1.67% to 362.4 amid limited market reaction. Retail bond adjustments eased household borrowing costs and contributed to 10-year yield compression.

Regional equities diverge on inflation differentials. iShares Poland advanced 0.47% to 40.35 while BIST 100 declined 0.79% to 13981.1. Poland advanced infrastructure projects in container and offshore wind capacity. No major data releases occurred in Czech Republic or Hungary.

Turkey maintains distinct macro path. USD/TRY rose 0.35% to 47.15 with BIST 100 posting net losses. Regional markets absorbed the Brent advance without sharp capital outflows, supported by ETF inflows into Polish assets.

Emerging Europe Central Banks Watch

NBP maintained its hold stance after recent inflation prints aligned with target levels, consistent with forward guidance. The bank continued gold accumulation, providing an additional buffer. CNB reiterated caution on price pressures that may return to or slightly above the 2% target, keeping OIS curves stable. MNB observed Hungary’s 10-year yield compression without altering its policy bias, supported by record FX reserves. BNR faces a more favorable inflation trajectory after the 10.4% year-over-year print, limiting near-term tightening odds. CBRT remains constrained by structurally elevated inflation, with no shift in forward guidance during the quiet week. Regional OIS pricing shows only limited movement ahead of potential ECB signals, preserving the data-dependent hold bias across NBP, CNB, MNB and BNR.

Data Review

Romanian July inflation data delivered a clear beat, with the month-over-month rate at 0.1% versus the prior 0.6% and the year-over-year print at 10.4% against a 10.6% consensus and 10.9% prior reading. This moderation signals cooling price pressures that should keep BNR on a cautious hold path through year-end. No high-impact releases occurred in Czech Republic, Hungary or Turkey during the week, leaving markets to digest prior trends. The Romanian beat reinforces the view that the regional disinflation cycle remains intact despite the Brent crude advance to 88.1. Hungary’s record FX reserves provide additional room for MNB to tolerate modest forint weakness without immediate policy response. Overall, the data flow supports unchanged rate paths for NBP, CNB, MNB and BNR into the second half of 2026 while CBRT faces structurally higher constraints.

The Week Ahead

Monday brings Malaysia trade data with limited direct read-through, followed by German PPI prints that may influence euro-area sentiment. Tuesday features Turkey Business Confidence Index, providing an early gauge of domestic demand. Wednesday includes Turkey Consumer Confidence and Poland headline unemployment. Thursday centers on the TCMB Interest Rate Decision. Central bank speakers from NBP and MNB may offer additional color on ECB spillovers. The releases matter because Polish labor data will confirm whether recent inflation prints sustain consumption momentum, while Turkish confidence indicators will test resilience ahead of the rate decision. Limited volatility is expected in regional FX absent surprises.

Risks & Themes

The Brent surge to 88.1 introduces upside inflation risks for energy importers that could delay any future easing signals from NBP and CNB. Poland’s coalition push on ETS reform may ease medium-term carbon costs but adds policy uncertainty. Geopolitical tensions weighed on the zloty intraday, highlighting sensitivity to external risk-off flows. Positioning remains light with ETF inflows concentrated in Polish assets, leaving room for reversal if oil sustains gains. Upside scenarios include faster Romanian disinflation supporting BNR cuts, while downside risks center on prolonged Brent strength widening Turkey’s inflation gap. OIS curves appear fairly priced for holds, with limited room for near-term surprises.

Cross-Asset

Equities showed modest net gains in Poland with iShares Poland rising 0.47% to 40.35, while BIST 100 fell 0.79% to 13981.1 on inflation differentials. Bonds delivered compression in Hungary where 10-year yields moved lower. FX markets reflected mild CEE pressure, with EUR/PLN advancing 0.31% to 4.34, EUR/HUF climbing 1.67% to 362.4 and EUR/CZK easing 0.29% to 24.18. USD/TRY gained 0.35% to 47.15. Commodities dominated price action as Brent crude jumped 5.76% to 88.1, while gold rose 0.55% to 4018.8 and Bitcoin added 1.1% to 64458.9. The oil impulse tightened conditions for importers without triggering sharp currency depreciation.

Global Context

Brent crude’s 5.76% advance to 88.1 over the past seven days re-anchored tighter financial conditions for CEE importers. US activity resilience continues to shape global rate paths. Euro-area data dependence remains intact with German factory orders showing stabilization. Geopolitical spillovers pressured the zloty and lifted safe-haven demand for gold to 4018.8. Trade dynamics favor Poland and Hungary through infrastructure export gains, partially offsetting energy cost pressures. Overall, the last seven days reinforced dollar-channel tightening without derailing the mid-expansion cycle.

Week in Review

Equity and currency pressure amid external support. South African equities posted a net decline as the JSE Top 40 fell on the final day, with Naspers dropping despite a mid-week surge. The rand weakened steadily, with USD/ZAR rising and EUR/ZAR advancing, reflecting cumulative daily moves.

Commodity offset and yield repricing. Brent crude climbed, supporting platinum and gold, yet these moves failed to prevent equity slippage. Short-term rates held steady while long-term yields eased, flattening the curve.

Data absence shapes positioning. No South African economic releases occurred between July 13 and July 19, leaving markets to price external oil strength and domestic political signals. Bitcoin closed higher after a weekly gain, providing limited risk-asset spillover. The data suggests investors entered the period with light positioning ahead of the July 22 inflation print, consistent with the prior period of global activity resilience that has kept external financial conditions tighter.

SARB Watch

The South African Reserve Bank maintained its repo rate path, preserving positive real rates against the latest year-over-year CPI reading. No SARB speakers or minutes were released during the week, leaving OIS curves anchored to data dependence ahead of the next decision. Higher Brent levels reinforced imported inflation risks, limiting any near-term easing priced into SARB OIS. The rand’s depreciation added modest upside pressure to the inflation outlook without shifting market-implied probabilities materially. Forward guidance remains focused on external commodity pass-through and domestic growth buffers, with the data flow confirming the hold-or-hike bias observed in prior weeks.

The Week Ahead

South Africa’s Inflation Rate Month-over-Month and Inflation Rate Year-over-Year prints on July 22 will set the tone for the upcoming SARB decision. Consensus expectations point to modest moderation from prior readings, which would support the current rate path if confirmed. Stronger-than-expected outcomes could lift SARB OIS pricing for a hold through the next meeting and into coming quarters. The releases matter because they directly inform the inflation component of the SARB’s reaction function amid elevated Brent levels. Markets will also monitor any follow-through from global producer price data that could affect imported cost pressures. Day-by-day focus centers on the Wednesday inflation release, with positioning expected to remain light until the outcome clarifies the near-term rate trajectory. No other high-impact domestic events are scheduled, keeping attention on how the prints shift expectations for subsequent decisions.

Risks & Themes

The week’s rand depreciation and yield compression signal tighter financial conditions that could weigh on credit-sensitive sectors if sustained. Upside risks center on continued Brent strength feeding through to mining output and the trade balance, while downside scenarios involve escalation in migration-related labor disruptions that widen output gaps. Market pricing appears to underweight the persistence of above-target global inflation spillovers that have already shifted developed-market curves higher in prior weeks. The absence of domestic data this period leaves the July 22 inflation release as the key catalyst that could reprice SARB OIS more aggressively than currently embedded. Overall, the data flow reinforces a cautious stance on growth momentum into the second half of the year.

Week in Review

Consumer sentiment rebound drives AUD outperformance. Australian data releases showed clear improvement, with consumer confidence rising and business confidence improving. These gains coincided with AUD/USD advancing 0.38% to close at 0.7 and NZD/USD rising 1.31% to 0.58, narrowing AUD/NZD by 1.09% to 1.19. Equity markets diverged modestly, with ASX 200 ending at 8796.7 after a 0.13% weekly decline and NZX 50 closing at 13694.68 for a 0.21% drop.

Commodity strength reinforces terms-of-trade support. Brent crude reached 88.1 after a 5.76% weekly advance, while BHP traded at 57.54 despite a 1.37% decline. Gold held at 4018.8 after a 0.55% gain, providing additional tailwinds for Australian export revenues. The data flow confirmed that iron-ore and energy price moves continued to shape currency performance more than domestic releases.

Policy signals diverge from easing expectations. RBA and RBNZ comments highlighted risks of further tightening if inflation pressures from conflict persist, contrasting with earlier market pricing for cuts. Australian 10-year yields declined on Friday, while NZ short-term rates remained steady. The week’s arc showed resilience in sentiment surveys offsetting mixed equity performance and reinforcing the view that above-target inflation will shape rate paths into coming quarters.

External balances remain in focus for New Zealand. Overall, the data suggested that commodity-driven income gains outweighed domestic demand softness, keeping both currencies supported against the USD.

ANZ Central Banks Watch

RBA and RBNZ officials signalled potential additional rate hikes if inflation pressures from conflict persist, with RBA minutes highlighting labour-market risks and the timing of the next easing step. The data therefore suggest that above-target prints reinforced by energy prices will keep both central banks data-dependent, limiting near-term repricing in RBA OIS and RBNZ OIS curves. No decisions occurred this week, but forward guidance shifted market-implied probabilities away from cuts at the upcoming meetings. OIS pricing showed only limited movement after the confidence rebound and commodity surge, consistent with tolerance for above-target inflation to support growth.

The Week Ahead

Monday brings New Zealand Inflation Rate Quarter-over-Quarter, a release that will directly inform RBNZ rate-path expectations. Tuesday features no major ANZ prints, leaving global risk sentiment and China demand signals as the dominant drivers for AUD and NZD. Wednesday sees Australia Employment Change, alongside Full-Time Employment Change and Headline Unemployment Rate. Thursday includes S&P Global Manufacturing PMI Flash and S&P Global Services PMI Flash for Australia, providing the first read on private-sector momentum ahead of the next RBA decision. These releases matter because stronger-than-expected employment or PMI prints would reinforce the case for holding rates higher for longer, while downside surprises could reopen easing discussions in coming quarters.

Risks & Themes

The week’s commodity surge and confidence rebound shift the outlook toward firmer financial conditions, with upside risks to inflation from Brent at 88.1 potentially delaying RBA and RBNZ easing. Downside scenarios centre on weaker employment data or China demand softness that could pressure AUD and NZD despite the recent gains. Markets appear to be underpricing the persistence of above-target inflation, as OIS curves still embed limited tightening relative to the signals from RBA and RBNZ speakers. Housing markets remain a key transmission channel, with any further yield volatility likely to amplify domestic demand sensitivity in both economies.

Week in Review

Trade data delivered a clear external offset. China June exports rose versus consensus and the prior print, while imports climbed against expectations, lifting the trade surplus. The stronger-than-expected external balance supported the yuan, with USD/CNY closing the week at 6.77 after a 0.13% net decline.

Domestic activity confirmed the slowdown narrative. Q2 GDP expanded below consensus and the prior quarter, while quarter-over-quarter growth matched the forecast. Industrial production beat expectations, yet retail sales turned positive at a modest pace versus an expected contraction. Fixed-asset investment contracted further, missing consensus, and new yuan loans fell short of expectations. House prices declined, extending the property-sector drag.

Equity markets split along regional lines. The Shanghai Composite declined and CSI 300 fell over the week, while the Hang Seng advanced and TAIEX dropped. Copper held near recent levels after a modest weekly gain, reflecting limited demand signals. Brent crude rose, adding to input-cost pressures already visible in the import surge.

Greater China Central Banks Watch

The PBoC maintained the 1Y Loan Prime Rate and the 5Y rate on July 19, consistent with market expectations and leaving the policy rate path unchanged. Daily USD/CNY fixings remained near recent levels, allowing the yuan to close the week at 6.77 after a modest 0.13% appreciation. No new forward guidance emerged from PBoC operations, though liquidity management via 7-day reverse repos continued ahead of the data prints. The Q2 GDP miss and new yuan loans print reinforce the case for steady policy accommodation rather than immediate easing. HKMA maintained the USD/HKD peg at 7.84 with no adjustment to the base rate, while CBC kept its policy stance unchanged amid the TAIEX decline. OIS curves continue to price limited near-term moves from either the PBoC or HKMA over the coming months.

Data Review

China June exports printed above consensus and the prior reading, confirming resilient external demand. Imports rose against forecast, widening the trade surplus from the prior level. Q2 GDP growth missed consensus and represented the slowest pace since 2022, while quarter-over-quarter growth matched the expectation. Industrial production accelerated, exceeding consensus and the prior reading, pointing to continued manufacturing momentum. Retail sales turned positive versus consensus, yet the modest rebound still signals weak consumption. Fixed-asset investment contracted, worse than forecast, highlighting persistent investment weakness. New yuan loans fell short of consensus, while the house price index declined. These prints together confirm that external strength is masking domestic demand shortfalls at a point in the cycle where policy support remains incremental.

The Week Ahead

Markets will focus on the July 20 Loan Prime Rate decision, where both the 1Y and 5Y benchmarks are expected to remain unchanged. Malaysia trade data on July 20 will provide an early read on regional external balances. German producer prices on July 20 and any follow-up PBoC liquidity operations will be monitored for spillover effects on commodity-linked assets. Taiwan semiconductor export orders due mid-week will offer the next high-frequency indicator for the island’s key sector. Hong Kong’s July 22 bond tender will test local funding conditions. No major mainland data releases are scheduled after July 19, shifting attention to State Council commentary on targeted support. Global risk sentiment and Brent crude moves will influence yuan fixing and equity flows. Analysts will watch for any signs that the Q2 GDP print prompts incremental policy adjustments before the next monthly data cycle.

Risks & Themes

The Q2 GDP miss increases downside risks to the growth target and raises the probability of additional targeted stimulus measures in coming months. Export strength may prove unsustainable if global demand softens or trade tensions re-emerge. Property prices continuing to decline keep developer funding pressure elevated without fresh policy support. Equity positioning shows clear divergence, with Hang Seng outperformance potentially reversing if mainland stimulus disappoints. Brent crude adds upside inflation risk that could constrain PBoC easing room. OIS curves currently price limited policy change, which may understate the need for accommodation if retail sales remain modest. Volatility in TAIEX highlights semiconductor exposure to global tech cycles.

Cross-Asset

Equities diverged sharply, with the Shanghai Composite closing at 3764.16 after a 3.82% weekly decline and CSI 300 at 4529.10 after a 3.54% drop, while the Hang Seng rose 1.44% to 24562.24. TAIEX fell 5.97% to 42671.27 amid semiconductor sector rotation. The yuan remained stable, with USD/CNY ending at 6.77 after a 0.13% weekly decline and the PBoC daily fixing holding near 6.76-6.77. USD/HKD stayed at 7.84 with negligible movement. Brent crude advanced 5.76% to 88.10, lifting energy-linked input costs, while copper gained 0.51% to 6.26. Gold rose 0.55% to 4018.80 and Bitcoin added 1.1% to 64458.09. Daily equity moves were largest on July 17, when Shanghai Composite fell 3.05% and TAIEX dropped 6.47% as GDP concerns intensified.

Global Context

US CPI cooling in June lowered near-term Fed hike odds and eased some dollar pressure on Asian currencies, including the yuan at 6.77. Brent crude strength reflected ongoing energy market tightness that feeds directly into China import costs. Trade balance resilience in China contrasts with mixed signals from other emerging markets still absorbing higher global borrowing costs. Cross-border flows into Hong Kong equities benefited from the relative stability of USD/HKD at 7.84 amid broader risk-on sentiment. Geopolitical tensions in energy transit routes continued to support oil prices, adding to input-cost pressures visible in the import surge.

Week in Review

Policy Normalization Arrives The Bank of Korea shifted to a data-dependent stance after June trade data showed solid external demand. Labor-market tightness persisted.

Export Momentum and Market Volatility June exports rose on semiconductor and shipbuilding shipments, widening the trade surplus. Equity markets saw intraday swings, with KOSPI closing at 6820.6 while KOSDAQ finished at 791.84. Samsung Electronics and SK Hynix recorded intraday moves exceeding 8%.

Currency and Yield Response The won strengthened 0.85% against the dollar to 1485.74, narrowing the Korea-U.S. yield gap as long-term rates moved higher. Short-term rates remained steady while broad money growth stayed abundant.

Commodity Impulse Brent crude rose 5.76% to 88.1, adding imported inflation pressure. The data flow confirmed stronger external demand and sticky domestic prices, shifting the policy stance toward normalization.

BoK Watch

The Bank of Korea ended the post-2023 easing cycle and aligned with market pricing for the first increase in over three years. Officials highlighted sticky CPI prints and record household debt as justification, while upgrading growth and inflation forecasts. No additional speakers appeared before the decision, and the accompanying statement emphasized further normalization only if inflation remains above target. Korea OIS curves showed limited repricing for additional moves at the next meeting, with the 10-year yield rising. The shift reinforces a higher-for-longer path conditional on export resilience and labor-market tightness.

The Week Ahead

Advance GDP estimates for the second quarter are scheduled for July 22. Markets will assess whether the prints confirm the external-sector support already visible in June trade data. Any upside surprise could sustain expectations for further tightening at upcoming decisions, while a downside miss would reopen questions about the pace of normalization. Officials are also expected to comment on the new Korea Strategic Technology Program and the offshore won settlement system launched this week. These releases will shape expectations for the coming quarters, particularly the balance between imported inflation from higher commodity prices and domestic demand resilience. FX intervention risks may rise if USD/KRW tests recent lows.

Risks & Themes

Leveraged single-stock ETF volatility triggered sharp swings in Samsung and SK Hynix, prompting regulatory scrutiny that could curb new product listings and alter equity positioning. Brent crude strength adds upside inflation risk that may keep OIS curves biased toward additional hikes if growth prints exceed expectations. The won’s July surge risks eroding export competitiveness, particularly if authorities accelerate internationalization measures. Markets appear to underprice the probability of a second consecutive tightening if labor-market tightness and oil-driven input costs persist. Downside scenarios center on a weaker-than-expected GDP release that could reopen easing bets at the following meeting.

Week in Review

Equity Market Resilience Regional equities advanced steadily through the week, with JCI climbing to 6,175.54 for a 2.28% weekly gain while PSEi moved to 6,404.11. KLCI rose 1.94% to 1,731.45 and SET added 0.68% to 1,639.04, supported by Brent crude strength that reached 88.10. STI posted a more modest 0.71% increase to 5,509.43.

Currency and Commodity Dynamics USD/IDR fell 0.7% to 17,939 over the five-day period, while USD/THB rose 0.72% to 33.57 and USD/MYR edged 0.48% higher to 4.09. Brent crude’s 5.76% weekly advance provided direct support to commodity-exposed currencies and indices across Indonesia and Malaysia.

Growth Data Confirmation Singapore’s Q2 GDP advance estimate printed in line with consensus on July 14, down from the prior quarter and signaling a moderation in the trade-exposed economy. Malaysia’s June inflation data carried a consensus aligned with subdued prints.

Policy and Rating Anchors S&P affirmed Indonesia’s investment-grade rating during the week and projected GDP growth for 2026 below the official target yet consistent with external financing constraints. Bank Indonesia’s policy rate hold continued to anchor expectations ahead of the July 22 decision.

External Balance Signals Indonesia’s Q2 foreign direct investment increase helped the rupiah recover, while Thailand’s central bank monitored baht weakness. The data flow therefore confirmed that commodity tailwinds outweighed softer growth prints in shaping the week’s asset performance.

ASEAN Central Banks Watch

Bank Indonesia maintained its policy rate stance through the period while preparing for the July 22 decision, with OIS curves showing limited repricing for near-term cuts. The Bank of Thailand held its rate unchanged and revised its 2026 growth forecast lower, citing household debt and investment shortfalls as persistent drags. Bank Negara Malaysia faced steady inflation expectations that left BNM OIS pricing anchored for no change at the next meeting. Bangko Sentral ng Pilipinas and MAS likewise saw minimal OIS shifts as regional data dependence remained the dominant theme. SBV continued to benefit from electronics FDI inflows without immediate policy pressure. Overall, the week’s commodity-driven equity gains reinforced expectations that the six central banks will tolerate above-target prints to support external balances into coming quarters.

The Week Ahead

Malaysia will release June exports, imports, and trade balance data on July 20, with prior export growth providing the benchmark for external demand strength. Germany’s producer price index prints on the same day will offer indirect signals for ASEAN input costs. Indonesia’s July 22 rate decision remains the focal event, with consensus pointing to another hold that would keep BI OIS curves stable. Thailand and the Philippines have no major releases scheduled, allowing focus on any updates to BoT or BSP forward guidance. Vietnam trade and Singapore data are also quiet, leaving markets to assess how the prior week’s Brent advance feeds into upcoming inflation prints. The configuration suggests limited near-term shifts in rate paths across BI, BoT, BNM, BSP, MAS, and SBV unless external balances deteriorate sharply.

Risks & Themes

Higher Brent levels could re-anchor inflation expectations higher and delay any easing at the next BI or BNM meetings if the impulse persists into coming quarters. USD/IDR remains vulnerable to renewed risk aversion. Singapore’s softer GDP print raises downside risks to MAS policy if external demand weakens further. Conversely, sustained FDI inflows into Indonesia and Vietnam could support local currencies and reduce pressure on SBV and BI reserves. Markets appear to underprice the risk that prolonged oil strength tightens financial conditions across ASEAN even as equities post gains.

Week in Review

Inflation overshoot dominates the narrative. Inflation rose above consensus, driven by food and energy components tied to Brent’s surge. The print lifted the rate path discussion without triggering immediate repricing in RBI OIS. Equity markets absorbed the data with limited volatility, as Nifty 50 closed the week at 24334.3 after a 0.51% gain while Sensex reached 78151.45 for a 0.69% advance. External buffers strengthened amid currency pressure. Forex reserves rose, providing additional capacity for rupee defense after USD/INR touched higher intraday before closing at 96.27. The rupee’s weekly 0.99% depreciation occurred alongside a wider trade deficit on weaker merchandise exports. Activity indicators remained supportive. Bank deposit growth accelerated on sustained capital inflows, while central capex rose and FDI equity inflows increased. Reliance advanced 2.34% to 1327.2 and HDFC Bank gained 0.20% to 819.6, reflecting sector rotation toward defensives. Oil impulse transmitted directly into inflation expectations. Brent’s 5.76% weekly gain reinforced the view that the inflation overshoot will keep the RBI on hold through the next meeting. The data flow confirmed earlier expectations of contained growth momentum rather than challenging them, with no major consensus misses on secondary releases.

RBI Watch

The Reserve Bank of India left the repo rate unchanged at 5.25% with no MPC member remarks during the week, preserving the data-dependent forward guidance established after the prior meeting. Inflation stayed inside the tolerance band around the 4% target yet removed any near-term cut odds, keeping RBI OIS curves stable. Forex reserve accumulation and stepped-up scrutiny of overseas corporate investments signaled continued focus on external stability. Market pricing showed no material shift in the timing of the next policy adjustment, with the inflation overshoot viewed as transitory given the RBI’s tolerance framework. OIS-implied probabilities for easing remained anchored beyond the upcoming decision.

The Week Ahead

HSBC Composite PMI Flash, Manufacturing PMI Flash, and Services PMI Flash are scheduled for release on July 24 and will provide the first read on third-quarter momentum. Consensus expectations center on readings consistent with mid-expansion, which would reinforce the case for steady policy at the next meeting. Stronger-than-expected prints would support the view that domestic demand continues to absorb higher energy costs without requiring immediate tightening. Weaker outcomes would heighten focus on growth risks into coming quarters and could reopen limited OIS repricing. The releases matter because they feed directly into the RBI’s assessment of the output gap ahead of upcoming decisions. Oil price volatility remains the key external variable that could alter inflation trajectories and currency flows before the next policy setting.

Risks & Themes

Elevated Brent levels introduce upside inflation risks that could prolong the RBI’s hold stance if sustained into coming quarters. The wider trade deficit and rupee pressure highlight external vulnerability should capital inflows moderate. Market participants appear to underprice the persistence of the inflation print, leaving OIS curves vulnerable to further hawkish repricing on any follow-through in PMI data. Upside growth scenarios from resilient capex and deposit inflows could offset these pressures, while downside stagflation signals would challenge the current mid-expansion baseline.

Week in Review

Equity and currency pressure amid energy rebound BIST 100 closed the full week lower, extending the prior week's resilience into outright weakness as Brent crude climbed. USD/TRY rose while EUR/TRY advanced, reflecting modest TRY depreciation against the broader dollar strength seen in prior weeks. Gold (TRY) gained, providing a partial domestic hedge.

Oil impulse tightens external backdrop The Brent advance reinforced the multi-week oil rebound, shifting Turkish financial conditions tighter through the energy channel without any offsetting domestic data release. GBP/TRY climbed over the week, consistent with the same global rates repricing that lifted 10-year yields elsewhere.

Data dependence persists into policy week No major Turkish releases printed during the week, leaving the market arc defined by external price action and positioning ahead of the TCMB decision. Bitcoin's weekly gain offered little spillover relief to local risk assets. The configuration confirms that above-target global inflation pressures, now reinforced by energy, continue to shape the Turkish rate path into coming quarters.

CBRT Watch

The Central Bank of the Republic of Turkey enters the meeting with the policy rate steady and no fresh forward guidance issued during the week. CBRT OIS curves showed only marginal repricing after the Brent surge, keeping the first cut still viewed as distant. Data dependence remains the dominant framing, with the oil-driven inflation impulse likely to reinforce the case for holding rates through the next several decisions. Market pricing continues to tolerate above-target prints to support growth, mirroring the pattern observed across DM central banks in prior weeks.

The Week Ahead

Monday brings limited high-impact Turkish data, allowing markets to focus on external drivers such as German PPI prints that could influence global rates. Tuesday features the Business Confidence Index, expected to provide an early read on 2H activity momentum ahead of the policy decision. Wednesday centers on the TCMB Interest Rate Decision together with the Consumer Confidence Index; consensus anticipates no change at the current policy rate, with any hawkish tilt likely to support TRY. The releases matter directly for the rate path because they will inform whether domestic demand remains resilient enough to justify holding policy through upcoming decisions. Later in the week, attention will shift to any follow-up speeches that could refine guidance for coming quarters. OIS markets will watch for confirmation that the oil impulse has not yet altered the expected sequence of holds.

Risks & Themes

Upside risks center on a stronger-than-expected Business Confidence Index that could delay any easing signal and keep OIS curves anchored higher. Downside risks include further Brent advances that widen the current-account gap and pressure TRY. Markets appear to underprice the persistence of the oil impulse into the next meeting, leaving room for a steeper repricing of the rate path if inflation expectations shift. The broader global resilience narrative from prior weeks continues to limit near-term CBRT optionality.

Week in Review

Oil-driven fiscal support Brent crude advanced to close at 88.1, with WTI reaching 81.78, as supply concerns from regional shipping risks lifted realized prices and downstream margins for Aramco.

Equity and rating resilience Saudi Aramco shares closed at 26.68 after a net 0.37% weekly decline, while MSCI Saudi ended at 36.79, down 0.86%. MSCI UAE declined 1.67% to 18.83 and DFM General fell 2.57% to 5813.93, while MSCI Qatar and MSCI Kuwait posted smaller moves at 17.7 and 36.17.

Data absence and project momentum No major GCC data releases occurred between July 13 and July 19.

Cross-asset stability USD/SAR held near 3.76 and USD/AED at 3.67 with minimal weekly shifts, while gold at 4018.8 provided limited safe-haven offset to the Brent advance. The data therefore suggest the oil rally re-anchored fiscal balances higher without immediate pressure on peg stability or equity valuations.

GCC Central Banks Watch

GCC central banks maintained steady policy settings with no speakers, minutes, or decisions reported during the week. Elevated Brent levels at 88.1 support stronger fiscal positions that reduce near-term pressure on GCC CBs OIS curves for easing, extending the data-dependent stance observed in prior weeks. OIS pricing showed no material shift as oil-driven revenue gains reinforced tolerance for above-target global inflation spillovers. Forward guidance remains anchored to external conditions, with the prior week's oil rebound continuing to shape expectations for unchanged rates into upcoming decisions.

The Week Ahead

Saudi Real Estate Price Index Year-over-Year and limited Malaysia trade data headline Monday releases, offering early signals on domestic demand that could influence GCC CBs OIS repricing. Germany Producer Price Index prints mid-week will feed into imported inflation assessments relevant for GCC rate paths. No high-impact GCC events are scheduled, keeping focus on OPEC+ compliance and any follow-through from Brent's advance to 88.1. Consensus expectations center on continued expansion readings that would support holding rates at the next meeting. Stronger-than-expected real estate or trade figures could trim any residual easing priced into GCC CBs OIS for coming quarters. Markets will also monitor Red Sea and Hormuz developments for further supply-risk effects on fiscal balances ahead of upcoming decisions.

Risks & Themes

The oil surge to 88.1 shifts the outlook toward sustained fiscal strength but raises upside inflation risks via energy channels that could delay any future GCC CBs easing. Downside scenarios include escalation in regional tensions that might further tighten financial conditions through higher yields. Markets appear to underprice the persistence of supply premia after two consecutive weeks of Brent gains exceeding 5%, potentially misaligning OIS curves with the data-dependent global rate path. Selective equity underperformance in UAE and Saudi benchmarks signals that diversification projects remain vulnerable to volatility.