Technical, sentiment, and flow driven activity in markets is leading to an upswing of market volatility set to the backdrop of a reescalation of “military activities” in the Middle East.
Chart Source(s): NFIB, FRB/Haver
This week has featured rapidly shifting sentiment around where the US is in its inflation/rates cycle.
The resolution to the US inflationary/rates situation over the coming months will set the stage for either calming risk taking appetites if the hawkish trend persists or igniting the next leg higher of speculation if a dovish narrative takes hold.
The first days of the week featured goldilocks inflation data that spurred on a rally in rates/risk and precious metals.
However, yesterday both the KC and Dallas Fed officials signaled their ongoing concerns about inflation, which threw some water on burgeoning dovish expectations.
A recent NFIB small business survey reflected the Fed’s concerns as inflation is considered the single most important problem for a growing number of firms.
Global Markets & Economic Data
- US: Headline inflation figures were cooler than anticipated and PPI figures contracted M/M. The 30-year mortgage rate rose to its highest level since August 2025.
- Switzerland/UK/Europe: SNB minutes from the June meeting indicated the central bank is ready to intervene in FX markets if needed. UK rolling 3-month GDP figures were higher than expected at 0.7%. European May Industrial Production unexpectedly declined, ending three consecutive months of growth.
- China/Japan: China’s trade surplus surged, led by tech exports. Japanese Machine Orders fell 12.4% M/M in May, far worse than forecasts.