MacroSpectrum @MacroSpectrum

What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/the-we… macro-spectrum.com/plans 1. This week’s economic calendar features only a light smattering of data as Fed officials will be in their usual communications blackout ahead of next week’s FOMC meeting on 29th July. 2. Last week's US inflation data had many surprises on the downside. June’s headline CPI (-0.42% vs. +0.47%) declined given the almost 10% fall in motor fuel prices. However, core CPI (-0.02% vs. +0.21%) came in meaningfully weaker than expectations. Taken together with the CPI data and import prices, we are tracking +0.18% for June core PCE, which would correspond to 3.3% year-over-year barring any revisions. 3. Looking ahead, we expect easing tariff effects and residual seasonality to keep core PCE inflation on a gradual disinflationary path. A 0.2% monthly core PCE print would represent further progress toward the Fed’s inflation objective and should reduce the likelihood of rate hikes in the near term. 4. We see a Fed on hold for REMCY26 as inflation seems to be cooling down in momentum and might further see another leg down from Sep’26. 5. Our trade idea on 1yr-1yr US SOFR receive at 4.15 was triggered last week and is currently at 4.04. We have a profit target of 3.90 and a SL of 4.40. Half of the risk was initiated at 4.15 and another half will be initiated at 4.25. 6. We continue to remain bullish on DXY & like JPY shorts at current levels. 7. In US macro data this week, we have initial jobless claims, S&P PMIs & new home sales. 8. In dated UST supply, we have $13 BN of 20yr UST auction on Wednesday & $21 BN of 10yr TIPS on Thursday. 9. The 2nd round of US Iran war has gained momentum & we expect Brent to open near $90 levels on Monday Asia morning. For detailed review note on the current state of affairs in Strait of Hormuz, please see below: macro-spectrum.com/opinion/the-re… 10. In RoW data, we have ECB meeting on Thursday where we expect a neutral hold. For detailed preview note on the ECB meet, please see below: macro-spectrum.com/opinion/ecb-ju… 11. We also have Canada CPI data due on Monday & UK CPI data due on Wednesday.

ECB JULY MEETING PREVIEW: We have released a detailed preview note on the 23rd July ECB meeting as below: macro-spectrum.com/opinion/ecb-ju… macro-spectrum.com/plans 1. We believe the ECB will leave rates unchanged at its 23 July meeting, despite the reescalation of the US-Iran war since 7 July. We continue to believe that ECB will hike by 25 bps in Sep meeting and be done with the rate hike cycle. 2. Markets currently price around 45bp of cumulative hikes in H2 2026; assuming a similar amount is priced going into the July meeting, we would expect marginally less to be priced by the end of the press conference. 3. Recent ECB speak is supportive of a July hold in rates, even by the hawks. 4. We believe that ECB market pricing at any time remains an oil trade. So, if oil continues to trade north of $85-90 levels on Brent in REMCY26, we can’t completely rule out Dec hike. But that is not our base case as of now. 5. We believe Mme Lagarde will urge caution and underscore that uncertainty is elevated, indicating the impact on the Euro area economy depends entirely on the duration and intensity of the conflict, neither of which are clear at this stage. Mme Lagarde will likely want to deliver as neutral a message as possible. 6. We do not have any strong views on Euro as of now but might like to receive 2 yr ESTR around 2.75 levels if available just before the policy event on 23rd July.

The Real State of Strait of Hormuz: Strait of Hormus is back in limelight. We take a detailed look at current middle east supply of crude as well as refined products as they stand yesterday. macro-spectrum.com/opinion/the-re… macro-spectrum.com/plans 1. The latest escalation stems from Iran’s attempt to redefine the terms under which commercial vessels transit the Strait. Tehran appears intent on establishing authority over navigation itself through mandatory transit protocols and transit fees. Oman responded by opening a US-backed corridor along its coast, enabling stranded vessels to leave. When several ships attempted to transit without complying with Iran’s requirements, Iran struck commercial vessels off the Omani coast to reinforce its position. The US responded by reinstating sanctions on Iranian oil exports, resuming a blockade of Iranian ports & daily aerial attacks on Iran in the night. 2. We believe crude oil and refined product net exports including the effect of rerouting stood at 50% and 20% of pre-war levels during the first week of the new phase. Aggregate total oil net exports at 45% of pre-war levels (including rerouting) so far in this new phase compare with averages of 31% in the initial escalation phase and 35% in the negotiation phase, indicating that there has been some progress in loosening Iran's hold over the strait. 3. In absolute terms, middle east export numbers stood at 8.4 mb/d for crude oil and 1.0 mb/d for refined products. 4. We see larger issue with refined product's supply than crude itself. Right now the market is short about 2.5 mbd of Middle East product supply. Add to that the Russian refinery issues where refinery runs have slipped to 3.3 mbd from 3.8 mbd last week, and are 2.0 mbd below last year’s levels, further tightening an already fragile global product balance. The strain is most visible in diesel: exports are now close to zero, down nearly 800 kbd from a year ago. 5. Last week we read the bipartisan Russia sanctions bill which if gets passed, might further adversely impact the refined product balance. Hence, to us the shock is increasingly becoming a refining story rather than simply a crude supply story. 6. On the larger picture, do we believe the current conflict is a forever war? We don't think so. 7. We continue to believe both sides are negotiating rather than seeking a prolonged confrontation. Iran’s main objective is no longer to restore the status quo ante. Control over Hormuz offers both strategic deterrence and a recurring source of economic leverage. But Tehran risks overplaying its hand: If it continues to squeeze, it will lose strategic leverage — not immediately, but over the next five years or so as its neighbours build more bypass routes. By striking oil tankers off the coast of Oman, it has convinced every one of the Persian Gulf states, as well as oil importers including deep-pocketed nations such as China and Japan, that the only way to guarantee future oil flows is to invest billions of dollars in new pipeline capacity. 8. We continue to believe in the range of 75-85 for Brent in REMCY26 & Brent falling gradually to 50 levels by H1CY27 and possibly sub 50 too in H2CY27 as alternate supply routes come online & global demand remains weak.

Chinese Moonshot Kimi K3 is US AI’s worst nightmare: We have released a detailed report on why this week's release of Kimi K3 from Chinese AI firm Moonshot is a game changer for US AI firms: macro-spectrum.com/opinion/chines… macro-spectrum.com/plans 1. Kimi K3 AI model delivers performance on industry benchmarks that rivals top-tier offerings from OpenAI and Anthropic PBC at cheaper costs. 2. From a technical perspective, Kimi K3 contains 2.8 trillion total parameters, making it one of the largest open-weight AI models ever released. Though, Claude Fable 5 & Mythos 5 has 6 trillion parameters along with GPT 5.1 Sol between 2-3 trillion parameters, Kimi K3's ability to do long horizon work rather than simply answering questions which makes it second to Claude Fable 5 at one third the cost. 3. Claude Fable 5 costs $10 per million input tokens and $50 per million output tokens. GPT- 5.6 sol costs $5 per million input tokens & $30 per million output tokens. Kimi K3’ costs $3 per million input tokens & $15 per million output tokens. 4. Kimi K3's native image and video understanding also allows it to revise interfaces, games and other digital content after inspecting its own output. 5. On Artificial Analysis' private long-horizon knowledge-work evaluation, K3 reaches an Elo of 1547, a massive jump from K2.6 and behind only Claude Fable 5. K3 slots in as the best open-weight agent, just behind Claude Fable 5 on reasoning depth and roughly even with GPT-5.6 Sol on terminal work, at a price between them. 6. Hence Moonshot’s Kimi K3 threatens the very base of US AI Capex. Moonshot looks like a viable alternative, that could upend the business case for its US AI competitors. It might threaten the revenue model and eventually put a doubt in the mind of investors if current AI capex run rate in US is sustainable. 7. Chinese models have already priced their services aggressively, undercutting US rivals. The weighted average cost of performing a standardized intelligence task using Kimi 2.6 or DeepSeek’s V4 Flash model ranges from 33 cents to just 2 cents, compared with $2.75 for the same task on Anthropic’s Claude Fable 5, according to benchmarking site Artificial Analysis. Moonshot’s latest offering is priced at a premium by comparison. Kimi K3’s cost on the same ranking is estimated at 95 cents. 8. Kimi does not have to be the world's single best model to upend the US AI dream run. For companies, governments and developers, a model that performs near the frontier, costs 40% less and can be customized or run in-house may be the more attractive option. Its very existence puts pressure on the pricing power of U.S. labs, the enormous valuations built around their technological edge, and the case for spending hundreds of billions of dollars on large data centers. While US might still have the edge currently, the rest of the world might choose a cheaper alternative & that should be a scary proposition for the US AI community.

What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/the-we… macro-spectrum.com/plans 1. The economic calendar picks up significantly this week with the main highlights being Tuesday’s CPI and Wednesday’s PPI releases which coincide with Fed Chair Warsh’s first Humphrey-Hawkins testimony before the House Financial Services and Senate Banking Committees. 2. In US macro data this week we have retail sales, PPI, CPI, initial jobless claims and Univ of Michigan prelims for July. We expect the growth momentum to continue in US data for now. We see Q2CY26 GDP tracking currently at 2.3% q-o-q ar. 3. In Fed speak this week, there is a deluge of speakers ahead of the communications blackout period, which starts at the end of the week. Communications this week will be the last opportunity for officials to provide any signals to the market about policy leanings ahead of the July FOMC meeting. 4. Despite the continued strength in June m-o-m core PCE inflation, a negative reading of headline inflation and upcoming PCE methodology changes will likely keep the Fed patient on rate hikes for REMCY26. We maintain our monetary policy outlook of no rate hikes for REMCY26. 5. Markets are currently pricing in 37 bps of hike in REMCY26 which looks just about stretched to us. 1yr-1yr US SOFR remains our high conviction idea based on above view, but the entry is yet to be triggered. We like receiving half risk at 4.15 and another half at 4.25 with stop at 4.4 and TP at 3.90. Last week it made a high of 4.09 before cooling down to current levels of 4.08. We also like being bullish on DXY till Sep against JPY and GBP. 6. On the middle east conflict, we believe current series of escalations implies markets building in some amount of risk premium and hence brent prices are likely to range between 75-85 in short term. We still believe both sides do not want a full fledged war and might return to negotiations sooner than later. 7. In RoW macro data this week, we have Euro area industrial production, Euro area final HICP readings and UK monthly GDP data. We also have BOC meeting on Wednesday where we expect Bank of Canada to remain on hold.

HOW US EQUITIES BEHAVE IN RATE HIKE CYCLES: We have released a detailed report on how US equities have historically behaved in rate hike cycles and their future outlook in current context of less Fed communication, elevated rates and higher rate vols: macro-spectrum.com/opinion/how-us… macro-spectrum.com/plans 1. Next Tuesday will bring the start of the Q2 earnings reporting season and a CPI release with key implications for the trajectory of Fed policy. 2. Earnings growth should determine the overall direction of equity market travel, but we would expect stocks to struggle in the short term if the Fed were to hike. 3. Three reasons: First, Fed tightening acts as a larger headwind than growth tailwinds for equities. Second, the AI boom has made the current cycle particularly capital-intensive, increasing the likely sensitivity to changes in the cost of capital. Third, Fed tightening is one of the conditions that has marked the peaks of past high-valuation, high-concentration bull markets. 4. We expect S&P to peak around 7700 levels in our base case scenario and 7900 levels in bull case scenario. The bear case might see 7200 if earnings disappoint or Fed hike probabilities increase further. Event risks such as middle east conflict might further act as headwinds for US equities as higher gasoline prices reduce consumer discretionary spending power.

WARSH WANTS TO BREAK THE HALL OF MIRRORS: We have released a detailed report on how the new Fed Chair Kevin Warsh is likely to change Fed's communication: macro-spectrum.com/opinion/warsh-… macro-spectrum.com/plans 1. The “hall of mirrors” is a well documented problem in central bank communications. Rather than providing an independent signal about what a central bank should do, market pricing reflects a complicated feedback loop between central bank communications and economic fundamentals. The more the central bank tries to communicate how its reaction function depends on near-term developments, the more markets interpret these developments through the lens of that central bank’s reaction function. 2. We believe financial markets perform best when they react to incoming data & they work less efficiently when they ask a question: How will the Federal Reserve react to that incoming information? Financial market prices are probably the most important source of information to guide central bankers. But when all the financial markets are doing is reflecting back what central bankers have said, then central bankers are blind to the most important set of information i.e true market information. 3. Warsh believes in breaking this hall of mirrors. We believe Warsh might provide NIL forward guidance, might ensure DOTS go away while SEPs remain, post FOMC press cons to continue but far lesser content and that too on long term trends rather short term view & continuation of a more streamlined Fed speak. 4. From a market perspective, with less forward guidance, term premiums are likely to stay elevated and IVs remain elevated across asset classes.

US CPI JUNE’26 PREVIEW: Below is our detailed preview note on the US June CPI data due on 14th July, Tuesday: macro-spectrum.com/opinion/us-cpi… macro-spectrum.com/plans 1. We expect core CPI inflation remained relatively stable at 0.20% m-o-m in June, after a 0.208% advance in May. We see likely headline inflation at -0.2% MoM. 2. We expect super core CPI inflation accelerated to 0.36% m-o-m in June, following a 0.27% advance in May. 3. Core goods inflation remained in contractionary territory due to waning impact from tariffs & lower used vehicle prices. 4. While June core PCE inflation likely remained above an annual rate of 2%, we expect the anticipated negative headline inflation and upcoming methodological changes to PCE prices will keep the Fed on hold for REMCY26. 5. Markets are currently pricing in 37 bps of hike in REMCY26 which looks just about stretched to us. 1yr-1yr US SOFR remains our high conviction idea based on above view, but the entry is yet to be triggered. We like receiving half risk at 4.15 and another half at 4.25 with stop at 4.4 and TP at 3.90. Last week it made a high of 4.09 before closing on Friday end at 4.08. We also like being bullish on DXY till Sep against JPY and GBP.

What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/econom… macro-spectrum.com/plans 1. Following last week’s labor data dump, this week’s economic calendar is relatively light with market participants likely to focus more on Fed communications which might come in Fed minutes release on Wednesday. 2. On the June NFP, it looked more noise than any signal and we expect policymakers to treat it accordingly. 3. Chair Warsh leaned dovish at the ECB’s Sintra forum and we expect Fed to remain on hold for REMCY26 till Fed receives recommendations from it's task forces. Warsh's own framing appeared closer to dovish policymakers, who have attributed elevated inflation partly to energy prices and tariffs. 4. Reportedly, former BOE Governor Mervyn King is likely to co-chair the Fed’s communications task force. King’s reported role reinforces the idea that the communications task force may recommend a less explicit Fed communication strategy. From a market perspective it implies higher term premium & higher vols. 5. In this week US macro data, we have ISM services, existing home sales and initial jobless claims. 6. We continue to believe that Fed might remain on hold for REMCY26 as inflation cools down just enough to support Warsh & other doves. Employment situation still looks stable but might not remain so after Sep’26. Hence if there is no middle east conflict re escalation, Fed might just wait entire H2CY26 to see how the labor-inflation dynamics evolve. 7. Markets are currently pricing in 30 bps of hike by end CY26. 1yr-1yr US SOFR remains our strong conviction idea based on above view, but the entry is yet to be triggered. We like receiving half risk at 4.15 and another half at 4.25 with stop at 4.4 and TP at 3.90. It’s recent high was at 4.12 before cooling down to current levels of 3.98. 8. We also like being bullish on DXY till Sep against JPY and GBP. We are neutral on EURO against USD. 9. In Row macro data, we have German factory orders, Euro area Sentix survey, German industrial production & Chinese PPI/CPI data.

A Subpar NFP does not mean a weak USD, Yet: We have released a detailed report on why we remain bullish on DXY even after a sub par June NFP: macro-spectrum.com/opinion/a-subp… macro-spectrum.com/plans 1. US Job gains slowed to 57k in June (Our estimate: 75k, Consensus: 113k), along with 74k of negative revisions to the prior two months. The deceleration was largely driven by negative payback after unsustainable strength in past months. Beyond the monthly noise, underlying employment growth remains solid. 2. While the weaker US June NFP report led USD lower (at least initially), we believe it may still be a little early to call this the start of a USD downtrend. The forces that have combined to strengthen the Dollar over the last few months look increasingly likely to endure. 3. We remain most bearish on JPY and then GBP. We remain neutral on EUR and bullish on CNH. Detailed report in the link above.

Why European Equities might do better than US Equities in H2CY26: We have released a detailed report on why we believe European equities can do better than US equities in H2CY26: macro-spectrum.com/opinion/why-eu… macro-spectrum.com/plans 1. H2CY26 might see European equities faring better than US equities on account of continued defence spending in Europe along with fading impact of the energy conflict which impacted Europe much worse than US. Also, it seems that H2CY26 might see the onset of crack in AI led capex theme which has worked out well for US till now. 2. S&P 500 has given a YTD return of 15.82% compared to Eurostoxx YTD return of 14.23%. Both are in dollar terms. This we believe is likely to change in favor of Europe in H2CY26.

Aluminium: Buy The Dip: We have released a detailed report on why we believe Aluminium current fall should be used to buy: macro-spectrum.com/opinion/alumin… macro-spectrum.com/plans 1. Aluminium prices have corrected by almost 20% from their recent highs. Price action looks extreme bearish for now, but we believe the bull market for producer margins & price is yet not completely broken. 2. Aluminium remains bullish for macro and geopolitical reasons. As such, it is not an especially attractive bear trade from current levels. Aluminium current dip is an opportunity to buy whether viewed through renewed geopolitical disruption or a more dovish macro backdrop. 3. We see prices bottoming over the coming month or so and recovering into September–December towards $3,300/t from current $3,090/t and possibly $3,500/t by March’27.

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What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/the-we… 1. Fed Chair Warsh’s appearance at the ECB’s annual Central Bank forum in Sintra, Portugal (Wednesday) and Thursday’s June employment report headline this week’s holiday-shortened economic calendar. 2. We expect Chair Warsh will keep his cards close at the Sintra meeting, similar to the post FOMC press conference, deflecting pointed questions by deferring to the five task forces currently being assembled. The more important signal will be how he frames recent developments in the Middle East and the decline in crude oil prices. 3. On the June NFP, we expect 75k headline no with unemployment rate at 4.3%. Lead indicators for the labor market have remained steady, but the fading impact of temporary factors that boosted hiring in May likely points to a softer June print. 4. On the inflation side, BEA has announced future changes to its methodology to estimate certain key PCE price components, including portfolio management and investment advice services, legal services, and computer software and accessories. The net impact from those changes has the potential to lower y-o-y core PCE inflation by 20-30bp. Those changes will take effect on 30 September 2026, along with annual revisions to the national account data. 5. In other US macro data this week, we have JOLTS, ISM manufacturing & consumer confidence. 6. There is no supply of dated USTs this week. 7. On policy front, we expect the Fed to keep policy on hold in REMCY26, with inflation developments posing risks to potential rate hikes. 8. There are no Fed speakers lined this week hence Warsh's speech on 1st July & NFP data on 2nd July might drive the markets. 9. In RoW data this week, we have Eurozone HICP inflation data this week along with likely comments from UK PM-in-waiting Burnham.

Precious Metals Still Not Out of Woods: We have released a detailed report on why we remain unconvinced of any material rally in precious metal prices any time soon: macro-spectrum.com/opinion/precio… 1. In our past publications released on 22nd March as well as 31st Jan we have been consistently bearish on both Gold & Silver. Since then, Gold has fallen to 4000 odd levels and Silver at 55 odd levels. macro-spectrum.com/opinion/precio… macro-spectrum.com/opinion/silver… 2. We continue to remain unconvinced by many US bank’s stories of Gold seeing 5000 odd levels any time soon. At least till Sep’26 we remain bearish on both Gold & Silver and do not have any optimism on their prices. 3. We believe that US macro data is likely to remain strong till Sep which implies rate hike probabilities wont be faded away and DXY is likely to remain bid. Both these imply a weak set up for precious metals. 4. If hikes do materialize (and especially if such hikes are perceived as more hawkish than warranted by the data), demand for gold as a macro policy hedge could unwind more persistently as market concerns about DM central bank independence ease further. Combined with rate-sensitive ETF holders net selling into higher rates, gold prices could then reach $3,600/toz by Dec’26. This assumes a total of 50 bps hike by Fed till Dec’26 against current expectations of 32 bps of hike. With only 25 bps of hike by end CY26 we might see gold stabilising between 4000-4400 levels by end CY26. 5. We have always been of the view that the price history of precious metals over the past two decades suggests that strong rallies, such as the one from September 2022 to January 2026 when gold gained 245%, are followed by substantial declines, even if the bulk of the gains are consolidated. 6. Amongst the 3 factors which drove Gold prices significantly in the last bull run, only one factor still remains which is global central bank's purchases. The other two factors: 1) strong retail demand by buyers in China & India wont recover in the short term due to higher margin requirements as well as higher import duties 2) Debasement trade is nearing its end. With US Iran ceasefire deal being announced, Gold’s demand as safe haven has reduced. Even trade war fears are now minimal thus reducing the risk premium on Gold prices. 7. To summarise, we remain unconvinced by Gold/Silver rebound theories based upon only one factor of global central bank demand. US data is likely to remain strong till Sep which implies rate hikes won’t be priced away and hence precious metals best case scenario is consolidation only around current levels +/-10%.

US NFP JUNE’26 PREVIEW: We have released a detailed preview note on the June NFP data due on 2nd July: macro-spectrum.com/opinion/us-nfp… 1. We expect nonfarm payrolls (NFP) slowed to 75k in June against May's print of 172,000 and current market estimates for June at 115,000. 2. Lead indicators for the labor market have remained steady, but the fading impact of temporary factors that boosted hiring in May likely points to a softer June print. 3. The unemployment rate likely remained unchanged at 4.3%. We expect average hourly earnings growth slowed to 0.2% m-o-m, driven by a negative calendar effect. Lead indicators and alternative wage measures suggest wage pressures are easing, albeit gradually. 4. Our NFP forecast is mainly driven by partial negative payback after exceptional strength in recent months. Overall, we believe the labor market remains resilient and is likely to gain steam in the coming months at least till Sep’26. Steady labor market conditions should keep Fed officials focused squarely on upside inflation risks. 5. We expect the Fed to keep policy on hold in REMCY26, with inflation developments posing risks to potential rate hikes. Markets are currently pricing in 32 bps of hike by end CY26 which has come down from as much as 40 bps last week. 6. 1yr-1yr US SOFR remains our strong convincing idea based on above view, but the entry is yet to be triggered. We like receiving half risk at 4.15 and another half at 4.25 with stop at 4.4 and TP at 3.90. Last week it made a high of 4.12 before cooling down to current levels of 3.92. 7. We also like being bullish on DXY till Sep against JPY and GBP. We turn neutral on EURO against USD.

Expected Index Extension & Rebalancing for June: We have released a detailed report on this quarter end index extension & rebalancing flows in G-7 rates and equities: macro-spectrum.com/opinion/expect… 1. JGBs (+0.13y) are in a refunding month and they are projected to have the largest duration extension this June. 2. EGBs (+0.05y) are estimated to have an overall extension, and this should be most supportive of Italian BTPs (+0.013y) on a weighted duration basis, on a sovereign basis Belgium OLOs (+0.33y) are the largest extension from of the major issuers. 3. UKTs (-0.02y) are expected to see a duration contraction, and USTs (+0.06y) see a duration increase. 4. For USTs, this is a non-refunding month with an extension +0.06y, roughly in-line with its June average over the past three years +0.06y, and below its 12-month average +0.07y. 5. The estimated quarterly rebalance towards bonds for US (+$81.3bn) and EU (+€113.4bn) is the largest in 10 years for both, UKTs (+£4.4bn) are just below their quarterly average. 6. On a monthly basis, the rebalance for the US (-$6.1bn) and UK (-£0.4bn) meaning its towards equities from bonds. The EU (+€33.5bn) sees a positive flow towards EGBs. Summary: Expect DM equities to remain subdued due to rebalancing outflows till 30th June & rates to gain further till 30th June on account of index extension as well as significant quarterly rebalancing inflows.

What we see ahead: Below is our weekly report on major economic data points in G-7 this week & our expectations: macro-spectrum.com/opinion/the-we… 1. As market participants digest last week’s FOMC meeting, as well as the Iran/US MOU, focus will be on New York Fed President Williams, as well as Chicago’s Goolsbee on Thursday, both of whom will appear after seeing the latest reading on the core PCE deflator, the Fed’s preferred (for now) inflation metric earlier that morning. 2. We expect core PCE to come hot at .38% MoM and 3.5% YoY. 3. While market is evenly split between whether Warsh was dovish or hawkish, we believe there are enough and more reasons for Fed to be on hold in REMCY26. Amongst the 5 task forces he has created, one is on inflation frameworks. Without the task force's final result which is unlikely before year end, we don't expect Warsh to hike. Also June onwards CPI readings will start cooling down due to falling energy prices. Core good prices are well behaved and tariff inflation is almost in it's last course. Once the world cup gets over in August, even service inflation might start stabilising. From Sep onwards we expect weakness in NFPs. Hence we see Fed on hold for REMCY26. 4. Amongst our rate views, if the 1yr-1yr US SOFR inches up to 4.10-4.15 levels from CMP of 4.03 levels, we like to receive half risk at these levels & another half at 4.25. Stop to this view is 4.35 and TP is 3.80. 5. In Fx, we remain bullish on DXY and have a short-term target of 102 from the current 100.85 levels. 6. There is no dated UST supply this week. 7. In RoW events, we have German IFO survey, European PMIs & Tokyo CPI.