Last week's key findings: This week, the market exhibited a pattern of strong US stocks, weak Asia-Pacific stocks, a stronger US dollar, pressure on gold, and slightly bullish crude oil. US stocks saw gains led by AI and semiconductors; Asia-Pacific stock markets showed significant divergence, with the Nikkei 225 experiencing sharp fluctuations, the Hang Seng Index rebounding, and A-shares exhibiting extreme structural market conditions; the US dollar index broke through the 102 mark, and the USD/JPY pair reached a near 40-year high; gold stabilized after three consecutive days of decline; WTI crude oil rebounded supported by geopolitical conflicts but was capped by the 200-day moving average. Short-term trading recommendations focus on buying low and selling high, with strict position control, and close attention to Federal Reserve policy and developments in the Middle East.

In the current context of continued geopolitical fragmentation and a profound restructuring of the global financial landscape, central banks are facing the dual pressures of risk: political barriers and policy restrictions could lead to the freezing of traditional reserve assets held overseas, rendering them completely useless, forcing central banks to prioritize political accessibility and legal security as key allocation criteria. The global financial market remains centered on the US dollar. Temporary dollar funding shortages will create rigid demand for readily available dollars, addressing liquidity risks during critical times.

Geopolitically, although Trump explicitly announced this week that the ceasefire agreement reached last month is "no longer valid," and the US has increased sanctions against Iran, the US and Iran have agreed to continue talks. Qatari negotiators arrived in Iran, and the US and Iran announced that negotiations will resume next week. This has led some traders to bet on the imminent lifting of the Straits blockade.

Last Week's Market Performance Review:

Last week, the three major US stock indices all closed higher. The S&P 500 and Nasdaq recorded weekly gains, driven by large-cap technology stocks. Nvidia rose about 4%, and Meta surged about 6%, boosting the technology sector. Meta, in particular, rose nearly 15% this week, marking its best weekly performance since early 2024. However, with AI concept stocks surging this year, concerns about a potential "boom followed by a pullback" in the second half of the year are also growing. On Friday, the S&P 500 rose 0.42% to close at 7,575.39; the Nasdaq Composite rose 0.29% to close at 26,281.61; and the Dow Jones Industrial Average rose 149.60 points, or 0.29%, to close at 52,637.01.

Gold prices fell near $4,115, pressured by a stronger dollar and investors preparing for the US inflation report. While geopolitical uncertainty continued to provide support for gold, higher Treasury yields could exert additional pressure.

Spot silver traded with overall downward pressure last week, falling slightly to below $60 on Friday (July 10), with a cumulative weekly decline of over $2, continuing the wide-range fluctuations seen in late June, and a significant drop from the previous week's closing price of $62.40. The current silver price movement is driven by three core variables: Federal Reserve policy expectations, Middle East geopolitical tensions, and US inflation data. The June CPI data released on July 14th will be a key turning point signal breaking the short-term stalemate between bulls and bears.

Last week, the US dollar index continued to decline, falling to a one-week low near 100.60. Signs of easing tensions between the US and Iran—US officials stated they remain committed to the memorandum of understanding with Iran, and technical negotiations are still progressing—weakened safe-haven buying of the dollar. However, inflation expectations supported by high oil prices limited the dollar's downside. Technically, the 100.50-100.60 area is a crucial short-term support zone for the dollar index. If there are clear signs of further easing tensions between the US and Iran (such as substantial progress in technical negotiations), the dollar may further test the psychological level of 100.00. Conversely, if the situation deteriorates again, a return of safe-haven demand could push the dollar back above 101.00.

The euro/dollar pair fell near 1.1420, and is expected to decline 0.19% this week as the dollar rebounded from its weekly lows. The pair will remain highly sensitive to US CPI and Warsh testimony, while the European calendar includes industrial production and final inflation data. The dollar fell 0.38% against the yen on Friday, closing at 161.70, marking its biggest one-day swing in over a week. The Government Pension Investment Fund of Japan (GPIF) significantly increased its allocation to domestic financial assets. The market interprets this move as potentially triggering a large-scale repatriation of funds from overseas to Japan, directly boosting demand for the yen.

The pound/dollar pair traded near 1.3400, rising about 0.34% this week after hitting a three-week high. The pound faces important domestic events, with UK GDP expected to grow 0.1% month-on-month in May, after a previous contraction of 0.1%. Industrial production is expected to grow 0.1%, while manufacturing output is expected to decline 0.1% after a previous increase of 0.4%. The Australian dollar edged higher against the US dollar around 0.6950, benefiting from a generally weaker US dollar and a recent strengthening of the yuan. However, the Australian dollar's performance next week will be highly dependent on Chinese economic data and US inflation.

WTI crude oil prices traded around $71.40 per barrel last week. Oil prices will continue to be sensitive to supply expectations, geopolitical risks, and the upcoming OPEC+ meeting. Recent price declines to pre-war levels have eased some inflation concerns, but any changes in supply guidance could quickly trigger volatility in the energy market.

The cryptocurrency market rallied again on Friday, with Bitcoin reaching $64,400, a more than 1% increase on the day, and regaining the level it failed to break through on Monday. A further break above this level would target the June 15 high of $67,250.

The yield on the 10-year US Treasury note fell to around 4.54% on Friday, marking its second consecutive day of decline, as falling oil prices helped ease inflation concerns and reduce fears of aggressive policy tightening.

Market Outlook This Week:

This week (July 13-17), global markets will see a flurry of important economic data releases and statements from central bank officials worldwide. Core data on inflation, growth, and employment will be released, coupled with updates to crude oil and commodity position data. These intertwined variables could significantly impact global equity, commodity, and foreign exchange markets. From core economic data from China and the US to policy statements from multiple central banks, from crude oil inventory reports to updated market inflation expectations, each key signal will adjust market trading expectations, revealing both short-term trading risks and structural opportunities. Investors need to analyze key variables in advance and prepare their positions accordingly.

The US will release its PPI growth rate and the New York Fed Manufacturing Index, measuring inflationary pressures and manufacturing activity in the US. In addition, Chicago Fed President Goolsby, Bank of England Governor Bailey, and New York Fed President will deliver public speeches, releasing signals regarding monetary policy from various countries.

The Federal Reserve will release its Beige Book, providing a detailed review of inflation, employment, and economic performance across U.S. states to inform future policy adjustments. Late in the trading session, St. Louis Fed President Musalaim, a hawkish candidate and a 2028 voting member, will deliver a speech.

Risk Warning: Key Data and Policy Variables to Watch

In addition to core economic data and central bank statements, investors should be wary of several potential trading risks:

First, repeated surprises or disappointments in global inflation data will directly revise expectations for the monetary policies of the Federal Reserve and the European Central Bank, triggering rapid corrections in the stock, bond, and commodity markets.

Second, speeches by central bank officials in various countries may indicate policy shifts or a change in hawkish or dovish stances, easily causing sharp short-term fluctuations in foreign exchange and equity assets.

Third, weaker-than-expected domestic GDP, social financing, and export data may suppress risk appetite in A-shares and Hong Kong stocks, dragging down the performance of growth stocks.

Fourth, significant changes in crude oil supply and demand data and global commodity fund holdings will disrupt commodity markets and energy-related sectors.

Fifth, uncertainties in overseas geopolitical situations may increase market risk aversion, leading to structural divergence in asset classes.

This Week's Conclusion:

Global markets experienced extreme structural divergence, with geopolitical conflicts and hawkish expectations from the Federal Reserve dominating volatility. US stocks saw strong performance in AI and technology stocks, while traditional value stocks weakened. In the A-share/Hong Kong stock markets, domestic capital sought safe havens, with only hard technology stocks showing resilience. Commodities saw a rebound in crude oil, while gold remained under pressure. The US dollar traded in a narrow range, and the offshore RMB saw a slight recovery.

Escalating US-Iran conflict → soaring oil prices → rising inflation expectations → increased expectations of a Fed rate hike → stronger US Treasury yields, a stronger dollar, and pressure on gold. Subsequent diplomatic easing will reverse course and correct asset prices, causing significant intraday volatility across the market in the coming week.

This week's key data releases include the US June CPI, the Fed Chair's hearing, and China's Q2 GDP. These three data points will directly impact interest rates and growth stock valuations in the financial markets.

Meanwhile, the ongoing Middle East situation and higher-than-expected inflation data will further suppress growth and precious metals. Weak domestic economic data will further amplify the structural market dynamics in A-shares, with only hard technology stocks possessing defensive characteristics.

Major investment banks collectively bearish on crude oil futures

The Strait of Hormuz is rapidly returning to normal shipping conditions, and geopolitical risk premiums continue to decline. According to Iran's Tasnim News Agency, Iranian Parliament Speaker Qassem Ghalibaf stated on the 3rd that the Strait of Hormuz will be jointly managed by Iran and Oman.

This statement stemmed from a meeting between Ghalibaf and Iraqi Parliament Speaker Haibat Khalabsi. He explicitly mentioned that the memorandum of understanding previously signed by the US and Iran has been incorporated into this management plan, and that Iran is widely soliciting opinions from Iraq and other Persian Gulf littoral states regarding the joint management mechanism.

This memorandum defining the rules for the Strait's governance is a key factor in the rapid return to normalcy in Strait of Hormuz shipping and the continued decline in geopolitical risk premiums, and it has also become the core geopolitical basis for major Wall Street investment banks to lower their oil price forecasts.

Citigroup issues pessimistic forecast: Crude oil may fall to $60-65/barrel by year-end

Citigroup recently released an energy research report, expressing an extremely bearish view on oil prices. The report predicts that with the gradual return to normalcy of oil transport through the Strait of Hormuz and the continued easing of geopolitical tensions between the US and Iran, Brent crude oil prices may fall to $60-65/barrel by the end of the year.

Citigroup also believes that the current US-Iran memorandum of understanding has a stable foundation for implementation, and a formal agreement is highly likely to be finalized in the coming months. For the US, Iran, and most countries in the Middle East, the economic and security benefits of easing geopolitical conflict far outweigh the costs of continued confrontation.

As a well-known investment bank holding a bearish view, Citigroup's bearish outlook on oil prices is based on a confluence of negative factors: full reopening of the Strait of Hormuz, the implementation of the Iran-Afghanistan co-management mechanism, and the continued clearing of geopolitical premiums; persistently weak domestic crude oil demand; a concentrated surge in Middle Eastern crude oil production in the short term, putting significant pressure on spot oil prices; and a slower-than-expected reduction in global crude oil inventories, weakening inventory support.

Bullish Market Logic: Low Inventories May Spur Temporary Replenishment Support

A mainstream view in the market is bullish on crude oil. Many industry analysts point out that four months into the current Middle East geopolitical conflict, crude oil inventories in the US and many other countries have fallen to multi-decade lows.

Based on past cyclical patterns, the subsequent concentrated replenishment of strategic reserves by various countries is expected to provide temporary support for international oil prices, forming a short-term bullish factor.

Goldman Sachs Refutes Replenishment Benefits: Global Crude Oil Surplus to Reach 3 Million Barrels Per Day Next Year

Goldman Sachs released a report last week significantly weakening the bullish value of low inventory replenishment. The bank stated that even if a global crude oil replenishment cycle begins simultaneously, it will not be able to offset the large-scale oversupply pressure in the market next year. The normalization of shipping in the Strait of Hormuz will further amplify the scale of surplus crude oil supply. The global crude oil oversupply will reach 3 million barrels per day next year.

Even with global efforts to replenish strategic petroleum reserves, only about 1 million barrels of excess supply can be absorbed daily, leaving a supply surplus of nearly 2 million barrels per day in the market.

Multiple investment banks have simultaneously turned bearish, limiting the medium- to long-term upside potential for oil prices.

Since the US and Iran signed a memorandum of understanding and finalized a joint management agreement for the Strait of Hormuz, several Wall Street investment banks have simultaneously shifted to a bearish stance, unanimously predicting that the crude oil market will fall into a supply glut next year.

Morgan Stanley has significantly lowered its 18-month oil price forecast, with its core logic consistent with Citigroup and Goldman Sachs: the full resumption of shipping through the Strait of Hormuz, coupled with the continued release of incremental supply from the Middle East, will accelerate the arrival of a new round of crude oil supply glut, continuously suppressing the medium- to long-term upside potential for oil prices.

Conclusion:

Considering the current market fundamentals and geopolitical policy changes, the divergence between bulls and bears in the crude oil market is very clear. Short-term restocking demand driven by low inventory levels can only provide temporary price support. The implementation of the Strait of Hormuz joint management agreement, the full resumption of oil shipping, and the long-term oversupply expectations resulting from the easing of US-Iran geopolitical tensions have become the core basis for major investment banks' collective bearish outlook on oil prices. Operationally, the summer rebound in crude oil prices is more suitable for shorting on rallies.

Technically, the overall correction in oil prices has been too large, and there is no significant rebound in the short term. It remains in a state where a rebound is imminent, presenting a good entry point.

Does gold have the upward momentum to challenge historical highs?

Gold continues to face downward pressure from the Fed's interest rate policies, but the continuous influx of new funds into global gold ETFs and the ongoing large-scale gold purchases by central banks can build a solid bottom support for gold prices. The policy signals released in the upcoming FOMC meeting minutes may directly determine the next stage of spot gold price movement. Market traders are closely watching the meeting's wording to adjust their long and short positions accordingly.

Fed Rate Hike Expectations Limit Gold's Rebound

The tightening market expectations for Fed rate hikes have fundamentally limited the upside potential of gold's current rebound. Precious metals themselves do not generate interest income. Once the market anticipates the Fed maintaining high interest rates or further rate hikes, the opportunity cost of holding gold will rise accordingly. A large amount of speculative capital will shift to the US dollar and US Treasury assets, directly suppressing the upward momentum of gold prices.

Two core bullish factors providing hedging support are: continuous net inflows into global gold ETFs and sustained large-scale increases in physical gold holdings by central banks worldwide. These two buying forces jointly support international gold prices.

Multiple Factors Weaken the Dollar's Strength

Despite the escalating geopolitical conflict in the Middle East, the dollar has failed to capitalize on this geopolitical safe-haven advantage and stage a strong upward trend. Historically, during geopolitical crises, the dollar has typically become the preferred safe-haven asset due to its status as a global reserve currency. However, the diversion of funds during this Middle East crisis is particularly evident. News of the attack on an oil tanker in the Strait of Hormuz has plunged the US-Iran nuclear negotiations into significant uncertainty. Despite the escalating geopolitical risks, Brent crude oil prices only saw a slight increase, far less than previously anticipated. Simultaneously, the S&P 500 resumed its strong rebound, and global risk appetite across asset classes improved, leading to a large influx of funds back into equity markets. This diverted funds that had flowed into the safe-haven dollar, further weakening the dollar's upward momentum.

Cooling expectations of a Fed rate hike have provided some room for gold prices to stabilize.

Cooling market expectations for a Federal Reserve rate hike have provided gold prices with some breathing room, allowing them to halt their decline and enter a period of consolidation. However, the looming risk of further rate hikes continues to weigh on the precious metal's upside potential, like a sword of Damocles. High inflation stickiness in core global economies means that a rebound in inflation data would rapidly increase the likelihood of the Fed restarting rate hikes, putting renewed downward pressure on gold prices. While the inflationary risks from energy supply shocks have gradually subsided, two long-term inflationary drivers remain: rising supply chain costs due to massive capital investment in the global artificial intelligence sector, and periodic price increases caused by frequent extreme weather disruptions to global commodity supply chains.

Market concerns about a potential further tightening of monetary policy by the Fed are a major concern. Under this constraint, most institutions predict that gold prices will find it difficult to challenge their previous historical highs by 2026, with a clear ceiling on short-term upward momentum.

However, from a medium- to long-term perspective, the combined positive factors of gold's demand as a core safe-haven asset for portfolio diversification, the continued influx of new funds into gold ETFs, and central banks' continued increased purchases of physical gold bars are sufficient to drive precious metal prices into a medium- to long-term upward trend.

The World Gold Council confirms the central bank gold-buying spree.

Official data released by the World Gold Council also confirms the central bank gold-buying spree: In May, global central bank gold reserves increased by 41 tons month-on-month. Many countries simultaneously increased their physical gold purchases, with emerging markets and some established European economies showing a continued strong willingness to buy gold to hedge against exchange rate and geopolitical risks associated with relying solely on dollar-denominated assets. Poland and China were the two largest buyers in terms of gold purchases that month. From the beginning of the year to the end of May, Poland purchased a total of 64 tons of gold, Uzbekistan increased its holdings by 33 tons, China purchased 25 tons, and Kazakhstan purchased 20 tons. Many central banks have adopted a continuous, phased gold-buying model, rather than a one-time large-scale purchase, forming a long-term stable support for physical buying.

In the short term, a strong US dollar index and continuously rising US Treasury yields will continue to put downward pressure on gold. Higher Treasury yields will further increase the holding costs of non-interest-bearing gold, weakening institutional investors' willingness to allocate gold in the short term.

Conclusion:

The future price trend of gold depends primarily on the futures market's re-adjustment of its pricing expectations for the medium- to long-term trend of the US federal funds rate. At this crucial juncture, all clues released in the June FOMC meeting minutes—including policy inclinations, official disagreements, and assessments of inflation and employment—will become the core basis for the market to reprice the Fed's interest rate path, inevitably profoundly affecting the short-term price fluctuations of gold.

A watershed moment for the US dollar index has emerged.

In the foreign exchange market, the US dollar index has become the most crucial risk pricing vehicle. Currently, the US dollar index is trading around 101, approaching its near one-year high.

Risk premium returns to the core of US dollar index pricing.

News indicates that the Iranian ceasefire agreement is under renewed pressure, escalating shipping security risks in the Strait of Hormuz, causing significant fluctuations in oil prices, with WTI crude oil rising to around $76 per barrel at one point. For the US dollar index, the energy shock is not simply a safe-haven story, but rather a simultaneous reassessment of three factors: inflation expectations, real interest rates, and non-US energy bill pressures.

The US dollar index is not an average performance of the dollar against all global currencies, but a weighted index composed of currencies such as the euro, yen, pound sterling, and Canadian dollar, with the euro having the highest weight, followed by the yen and pound sterling. Therefore, when the energy shock more significantly suppresses the terms of trade in Europe and Japan, the US dollar index often passively receives support, even if the US itself faces inflationary pressures from oil prices.

The Fed's path has once again become a key variable in the market's trajectory.

A rise in the US dollar index does not equate to the market unilaterally pricing in a strengthening US macroeconomy. More accurately, the current pricing focus is on whether the Fed can continue to maintain restrictive interest rates. The Fed's June meeting decided to maintain the target range for the federal funds rate at 3.50% to 3.75%, with the upper limit of the current target range remaining at 3.75%.

This means that the short-term elasticity of the US dollar index comes more from "compressed expectations of interest rate cuts" or "the re-introduction of tail risks from interest rate hikes," rather than from optimistic growth sentiment. New York Fed President Williams recently stated that falling energy prices have helped ease inflationary pressures, but emphasized that policy still depends on subsequent data. This statement leaves room for market speculation: if the oil price shock continues, policy expectations will tighten; if housing and consumption continue to cool, the dollar's interest rate support will weaken.

This logic is also reinforced on the bond market. On July 8th, the yield on the 10-year US Treasury note hovered around 4.55% to 4.56%, remaining high. For traders, the dollar index is currently not solely a safe-haven asset, but rather a trade on whether the "oil price shock will translate into higher nominal interest rates." As long as long-term yields do not fall significantly, the downside potential of the dollar index is likely to be limited.

Housing inventory pressure limits the dollar's medium-term narrative

The dollar index's upward movement is also constrained by macroeconomic factors. The US housing market is already experiencing inventory pressure. The latest housing platform data shows that in May, there were approximately 1.2999 million units for sale, with a median listing price of approximately $409,600. In April, 55.5% of transactions were sold below the listing price. This indicates that the supply and demand structure in the housing market is shifting from seller dominance to stronger buyer bargaining power.

Regarding existing home sales, May sales increased by 3.2% month-over-month, but the broader context is that housing activity remains low. Existing home sales have not yet fully recovered from their previous trough, and new home sales and starts also lack strong expansion. For the US dollar index, this creates a medium-term contradiction: geopolitical risks and oil prices are pushing up inflation expectations, supporting the dollar; weak housing inventories and sales are suppressing domestic demand expectations, weakening the dollar's fundamental resilience.

Conclusion:

Investors digested the minutes of the June 16-17 Federal Open Market Committee (FOMC) meeting, the first meeting minutes under Federal Reserve Chairman Kevin Warsh.

The minutes reinforced the Fed's cautious stance, showing that policymakers unanimously agreed to maintain interest rates while continuing to believe that upside risks to inflation remain high. The document favors a narrative of "higher interest rates for longer," as some policymakers believe that further rate hikes may be necessary if inflation follows an unfavorable path. However, the dollar failed to gain strong support from investors, who weighed the impact of slowing growth expectations and recent weak US labor market data.

The euro fell to a one-year low against the pound.

During the European session last week, the euro held steady near a one-year low of 0.8540 against the pound. German industrial production rose 0.9% month-on-month in May, far exceeding expectations, but the euro received little boost. Weaker German inflation data continued to diminish market expectations for an ECB rate hike, and Lagarde Sintra's refusal to commit to a rate path reinforced expectations of no change in July. The euro lost its previous advantage of monetary policy divergence relative to the Bank of England. The UK Lloyds house price index rose 0.2% month-on-month and accelerated to 0.6% year-on-year, both exceeding expectations, providing marginal support for the pound.

However, the euro failed to gain support from the strong data, as the continued pullback in market expectations for a European Central Bank (ECB) rate hike constituted a larger macroeconomic drag – since last week, the euro has fallen more than 1% against the pound, hitting its lowest level since July last year.

In the UK, the Lloyds house price index showed a 0.2% month-on-month increase in June, accelerating to 0.6% year-on-year, both exceeding expectations. ECB President Lagarde, at the Sintra Forum, refused to commit to any specific interest rate path, and her statement that "growth and inflation risks have balanced" reinforced expectations of no change in interest rates in July, causing the euro to lose its previous advantage of monetary policy divergence relative to the Bank of England.

German industrial output exceeded expectations.

German industrial output data for May was quite strong: a 0.9% month-on-month increase, far exceeding market expectations of 0.2% and significantly accelerating from April's 0.4%. This data should have been a short-term positive for the euro. However, the market reaction was intriguing—the euro gained almost no boost from the data.

This phenomenon of "immunity to good news" reflects the core contradiction in current euro trading: market expectations of ECB policy have become a more powerful pricing driver than economic data. Against the backdrop of a continued waning expectation of ECB rate hikes, economic data from a single country is insufficient to reverse the overall weakness of the euro.

The Policy Roots of Euro Weakness: The Continued Disintegration of ECB Rate Hike Expectations

The euro has fallen more than 1% against the pound since last week, hitting its lowest level since July last year, rooted in a shift in the direction of ECB policy expectations.

Weakening German consumer price data suggests that inflationary pressures from the Middle East conflict may have peaked, directly reducing the urgency of an imminent ECB rate hike.

Lagarde's stance is effectively paving the way for a no-rate-rate move in July. After the June rate hike, the ECB needs time to assess the actual transmission effects of the energy shock on economic activity and prices, rather than hastily continuing to tighten.

For the euro, the key issue is that a crucial supporting factor previously was the divergence in monetary policy between the ECB and the BoE, which perceived the ECB as more hawkish. When this logic disintegrated as ECB rate hike expectations faded, the euro lost a significant structural support.

Supporting Data from the UK

In contrast to the divergence in Eurozone data, UK data also exceeded expectations. While house price data isn't the Bank of England's core consideration in monetary policy (wage and service sector inflation are more crucial), its better-than-expected performance at least indicates that the UK economy has shown some resilience in a rising interest rate environment. This is a marginally positive signal for the pound.

The Reversal of Monetary Policy Divergence: The Collapse of the Core Logic

The core narrative of the current euro/pound exchange rate movement can be summarized as a "directional reversal of expectations regarding monetary policy divergence."

In previous months, the market had expected the ECB to maintain a more hawkish stance than the Bank of England for a longer period—an expectation that supported the euro trading above 0.8600. However, with: German inflation data showing the energy shock is fading; Lagarde explicitly refusing to commit to an interest rate path; and market expectations for an ECB rate hike in July almost disappearing, the euro's "interest rate premium" relative to the pound is rapidly shrinking. Meanwhile, while the Bank of England is also facing a pullback in rate hike expectations (from two to one with only a 70% probability), the contraction is relatively mild, and the hawkish camp within the BoE is expanding (two members at the June meeting advocated for a rate hike to 4.00%).

This policy divergence—the ECB turning dovish while the Bank of England remains stable—is the fundamental reason for the euro's fall to a one-year low against the pound.

Conclusion:

Directional Choice After 0.8540

The euro is hovering around 0.8540 against the pound—its lowest level since July of last year. The short-term directional choice depends on the following variables:

First, the further evolution of policy expectations for the ECB and the Bank of England. If Lagarde further hints at a "pause in rate hikes" in subsequent speeches, the euro may continue to test the 0.8500 level; if ECB officials attempt to correct the market's over-interpretation of a "dovish turn," the euro may gain some breathing room.

Second, whether German industrial production data can continue to improve. While the May data was strong, a single month's data is insufficient to reverse the overall trend. If subsequent PMI and ZEW economic sentiment indices show a sustained recovery, the market may reassess the Eurozone's growth prospects.

Third, UK inflation data (especially wage and service sector inflation) will be a key indicator of whether the pound can maintain its strength. If data shows a second wave of effects is forming, the market's expectation of a 70% probability of a Bank of England rate hike this year will move closer to 100%, giving the pound further upward momentum.

Overview of Key Overseas Economic Events This Week:

Monday (July 13): Speech by Michelle W. Bowman, Member of the Federal Open Market Committee (FOMC); OPEC Meeting; US June Global Supply Chain Stress Index; June ISM Non-Manufacturing New Orders Index

Tuesday (July 14): Westpac/Melbourne Consumer Confidence Index (Month-on-Month, July); NAB Business Confidence Index (June); Japan Industrial Production (Month-on-Month, May); ADP Employment Change; US CPI (Month-on-Month, June);

Wednesday (July 15): Japan Reuters Tankan Index (July); UK Core CPI (Year-on-Year, June); US PPI (Month-on-Month, June); Bank of Canada Interest Rate Decision; US EIA Cushing Crude Oil Inventory Change (Barrels) Thursday (July 16): Australian Consumer Inflation Expectations (July); Japan GDP QoQ (%) (YoY) (May); UK Trade Balance (GBP) (May); US Retail Sales MoM (%) (MoM) (June); US Philadelphia Fed Manufacturing Index (July); US Initial Jobless Claims; US Retail Sales Expectations MoM (%) (MoM) (June)

Thursday (July 16): Australian consumer inflation expectations (July); Japan's GDP quarter-on-quarter (%) (YoY) (May); UK trade balance (pound) (May); US retail sales month-on-month (%) (June); US Philadelphia Fed Manufacturing Index (July); US initial jobless claims; US retail sales expectations month-on-month (%) (June)

Friday (July 17): UK CPI YoY (%) (MoM) (June); Eurozone CPI YoY (%) (YoY) (June); US Housing Starts (June); US Industrial Production YoY (June); University of Michigan Consumer Sentiment Index (July)

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