Inflation

Euro-area inflation jumped four tenths in August as energy surged to 14.3%. Services cooled and the core rate slipped to 2.4%, concentrating the flash print in the energy column.

Japan’s economy grew 0.3% in the second quarter, but net exports supplied 0.5 percentage point while domestic demand subtracted 0.2. Consumption was flat and business investment fell 1.2%.

A double-digit monthly tablet jump barely registered in the consumer basket, while cheaper gasoline dominated the month. China’s own methodology leaves the AI explanation as interpretation, with causality unproven.

Payrolls fell 23,000 as the civilian labor force contracted 264,000 and participation slipped to 61.4%. Household employment also fell, so the lower jobless rate came with a smaller pool of people counted in the labor market.

South Africa’s central bank paused after May’s rate rise even as inflation reached 5%. Its own scenarios leave another hike waiting on fuel costs and expectations.

Bank Indonesia kept its policy rate at 5.75% after two increases and widened hedging incentives for foreign investors. Currency support is moving through the market’s pipes as well as its headline rate.

Traders have bid crude on persistent Hormuz risk while investors sold the chip complex despite record results. The Federal Reserve remains on hold and the Bank of Korea has just hiked. Price action splits between an inflationary supply shock and a reappraisal of AI-capex durability.

The board tied stronger growth to semiconductor exports and investment while confronting a weak won and persistent inflation. The same decision arrived as chip shares endured a violent sell-off, leaving policy and markets reading the same AI cycle differently.

A soft June price print pulled buyers toward duration even as Hormuz lifted crude. IBM supplied the warning beneath the rally: AI hardware bills are starting to eat software budgets.

Inflation risks tilted upward in the June FOMC record released on 8 July, and futures pushed September hike odds to 65.7%. A firmer dollar and a Gulf oil spike added hawkish fuel as cross-asset markets treated the day's shocks as cost-push pressure.

Monday’s session lifted the PHLX Semiconductor Index 2.17% and the Nasdaq 1.12% while S&P decliners still outnumbered gainers, a chip-led bounce that nearly scored a false FX miss on a misdated yen high. Wednesday’s June FOMC minutes land with September hike odds near 58% against services inflation still running hot.

Finance Minister Katayama said Tokyo stands ready to respond to excessive yen moves and is in contact with US authorities, the clearest signal this cycle that intervention could be coordinated. USD/JPY pulled back from a four-decade low near 162.84 toward 161 after soft June payrolls. The house assigns a 0.40 probability that the pair retests 162.50 before the 10 July Tokyo close.

USD/JPY pulled back toward 161 after June's soft payrolls cut near-term Fed-hike odds, yet Tokyo disclosed zero intervention through late June and the US–Japan rate gap remains wide. Probability sits at 0.45 that the pair prints above 162.66, a fresh four-decade yen low, before 31 July 2026.

The Japanese yen fell to its weakest level against the dollar in roughly four decades on 1 July, with Reuters citing USD/JPY at 162.84 before a modest rebound. Rate differentials, a firmer dollar and rising U.S. yields in thin holiday liquidity drove the move, while Tokyo kept its intervention posture alive without confirming fresh action.

A late-June heatwave broke June temperature marks from Spain to Switzerland, left hundreds dead including an estimated 212 in Spain over four days, and loaded hospitals, farms, power systems and outdoor labour with concurrent strain. WMO ties the pattern to Europe's fastest-in-the-world warming and a roughly 80% El Niño probability this summer.

Odesa’s terminals are the visible target. The quieter strike lands on Ukraine’s export cash flow, repair queue, freight bill and winter power ledger.

Kevin Warsh’s first meeting as Fed chair did not move rates, but it moved the regime. The committee held steady while stripping back the map markets had been using to trade the next turn.

Russian strikes on Odesa-region ports threaten to turn Ukraine’s export corridor into a lower-capacity, higher-cost system. The under-reported pressure is fiscal: port repair and winter power-grid repair now draw on the same scarce wartime resources.

Brent’s fall toward $78 is not only the removal of a war premium. It is also the first repricing of stranded Gulf barrels entering a market where refiners are already covered, Chinese demand is patchy, and the toll question has only been postponed.

The paper trade is repricing peace faster than tankers are moving. The remaining question is whether the last dollars of premium unwind into sub-$80 Brent or harden into a permanent Hormuz toll.

US inflation in May looked scary — 4.2%. But almost all the scary part was energy, which is really a Hormuz story. Next week the Bank of Japan, the Fed, and the Bank of England decide in three days whether to believe the number — and the Fed's call may rest on an oil chokepoint no central banker controls.