Markets in the face of neutral sentiment and stable macroeconomic data

The current Fed interest rate is 3.50-3.75%, and the next FOMC meeting is scheduled for July 29. Market expectations suggest that interest rates will remain unchanged with a 66.3% probability, while 33.7% of market participants foresee the possibility of an increase to the range of 3.75-4.00%. The absence of any forecast for a rate cut suggests that investors are rather calm about the direction in which Fed monetary policy is heading. The stability of expectations may be a result of the lack of significant changes in macroeconomic data.

Data on inflation in Europe showed price stability. In Germany, the final CPI year-on-year rate was 2.3%, in line with forecasts and previous readings. The HICP rate also remained at 2.4%. Similarly, in France, both the annual CPI and HICP stood at 1.8% and 2%, respectively, which is consistent with forecasts. The monthly change in CPI in France was -0.3%, slightly below expectations (-0.2%). The stability of these indicators suggests that inflation in the eurozone is currently not exerting additional pressure on the European Central Bank regarding changes in monetary policy.

Japanese data on the Producer Price Index (PPI) shows an increase of 0.4% m/m, in line with expectations, although this is a decrease compared to the previous month when the index was 0.9%. The annual increase in PPI reached 7.1%, exceeding forecasts of 6.8% and the previous reading of 6.3%. The rise in producer prices may indicate inflationary pressures that could influence future decisions by the Bank of Japan regarding monetary policy. Nevertheless, the current stability of the indicators suggests that the Bank of Japan may not implement significant changes to its policy for the time being.

In the geopolitical context, attention was drawn to the comment made by former US President Donald Trump regarding the end of the ceasefire with Iran. The impact of such statements on the markets may be moderate; however, the escalation of tensions in the Middle East always carries risks for the stability of commodity prices, especially oil. Currently, discussions are also ongoing regarding the implementation of the USA-Iran agreement memorandum, which may be crucial for further de-escalation of the situation.

Tomorrow should bring further observations of macroeconomic data that may influence expectations regarding the monetary policy of major central banks. Particular attention should be paid to any new information regarding geopolitical tensions that may affect the volatility of commodity markets, as well as any changes in market expectations regarding future Fed decisions.