Insights 
VT 
Economic Updates
Investors anticipate the US PCE price index release and end-of-month trading. Market focus will remain on trade developments, the economy, and central banks, despite potential distractions from month-end flows. This comes after weeks of geopolitical tension, with a fresh start anticipated in July.
We’ve reached a point in the month where trading volumes might be skewed by positioning and index rebalancing, but that doesn’t mean the current figures should be dismissed. Price action in the FX space, particularly the muted moves in major dollar pairs, suggest that markets are waiting for something more decisive before making their next big wager. The stability in EUR/USD above 1.1700 implies a level of comfort—or at least indifference—towards the shared currency for now.
In Japan, the modest uptick in USD/JPY tells us that the rate differential story still carries weight. With US yields ticking higher again—this time adding just over two basis points—there’s some reinforcement for the yen underperformance narrative. Meanwhile, currency pairs like USD/CHF and AUD/USD are behaving slightly more independently. The Swiss franc’s movement below 0.6800 hints at risk appetite increasing on the periphery, while the Aussie’s test of daily highs suggests some quiet optimism towards commodities or regional demand, albeit with limited conviction so far.
Equities are behaving closer to textbook models. When we see S&P 500 futures nudging higher—up 0.4% in pre-market—that generally feeds into risk-on sentiment. But gold’s sharp 1.3% drop at the same time cannot be explained by equities alone. When precious metals behave like that, especially during steady FX trade, it’s a reflection of rate expectations or reduced safe-haven demand. If rates are expected to stay high for longer, that often pressures non-yielding assets like gold. Likewise, Bitcoin’s dip brings a cooling off from recent surges. It has been one of the more sensitive tickers to speculative shifts; today’s drop aligns with tighter liquidity expectations ahead of the US data.
Market Interpretations
Fixed income movement also offers some guidance. The rise in US 10-year yields might appear modest on paper—2.2 basis points—but in this context, it’s worth noting how consistently yields have crept upwards. Markets interpret that as a continued leaning towards tighter monetary settings, or at least a dismissive stance from central banks regarding near-term cuts.
As for Europe, inflation data delivered a mixed set of surprises. France’s CPI beat expectations by a couple of tenths, with Spain also coming in hotter than markets feared. Meanwhile, Italy’s consumer confidence figure came in a notch below forecast, reminding us that high prices continue to weigh on sentiment in certain pockets of the continent. The Eurozone-wide consumer confidence stayed at -15.3, showing no improvement despite headlines suggesting a stabilising macro picture. These readings shouldn’t be brushed aside—they may affect rate expectations for the ECB as we head into Q3.
And now, with the US PCE price index drawing nearer, we find markets moving into a more cautious posture. This metric continues to serve as one of the primary inflation gauges the Federal Reserve tracks closely—it forms one of the technical guides for adjusting their rate path. A stronger-than-expected reading could undermine today’s early bullish tone and trigger a reaction across rates, FX, and equities. A softer figure could be met with relief, though gains would likely be capped by the proximity to quarter-end and the weight of previous positioning.
With the current attention split—between final inflation reads in Europe, upcoming key data in the US, and residual flows from month-end recalibration—short-term positioning will likely prioritise data-driven setups. We don’t particularly expect headline chasing unless there’s an unexpectedly large revision or shock element from the US readout. The sequencing from here suggests calm for now, followed by a potentially reactive session once PCE figures land.
That said, we remain aware that equity moves near record highs, modest oil gains, and bond yield shifts are not occurring in isolation. The market is quietly piecing together a view on whether the Fed will stick to its current tone or adapt as core inflation inches along. With July offering a clean calendar and potentially fewer distractions, there’s scope to position for cleaner directional trades—data pending.
