Japan’s Inflation Shift: From Apologies to Acceptance in the Age of Persistent Price Hikes

1. U.S. Treasury Department significantly raises quarterly borrowing estimate to replenish cash reserves.

2. Canadian Prime Minister says Trade Talks with U.S. are at an intense phase.

3. Iran: Europe has no authority to invoke the Snapback Sanctions Mechanism.

4. The Thailand-Cambodia Ceasefire Agreement officially takes effect.

5. Trump limits Russia-Ukraine ceasefire to 12 days.

6. Trump says to announce pharmaceutical tariffs soon.

7. Timiraos: Fed not ready to cut rates this week.

The U.S. Treasury Department has sharply increased its estimate for federal borrowing in the current quarter to $1 trillion, primarily due to the impact of the debt ceiling. In a statement released Monday, the Treasury said it now expects net borrowing of $1.01 trillion from July to September, up from the $554 billion projected in April. The government had to reduce bond issuance in the first half of the year to avoid breaching the debt ceiling. Since Congress raised the debt ceiling by $5 trillion earlier this month, the Treasury has accelerated bond sales to rebuild cash reserves. By convention, the Treasury's April estimate did not account for debt ceiling constraints. At the time, it assumed a cash balance of $850 billion at the end of June, but the actual balance was only $457 billion. The Treasury noted that even without factoring in lower-than-expected initial cash balances for the quarter, its current borrowing estimate is $60 billion higher than the figure announced in April.

Canadian Prime Minister Mark Carney stated that although U.S. President Donald Trump recently remarked that reaching an agreement with Canada was not a priority, the two governments are still engaged in in-depth trade negotiations. Regarding Trump's comments last week that the U.S. is not focused on Canada and may not reach a tariff agreement, Carney downplayed the remarks. Speaking to reporters on Monday, he said, "It's a complex negotiation," and added that publicly stated remarks should be considered in that context. He explained that talks with the U.S. are at an "intense phase" and reiterated that an agreement would only be signed if it is beneficial to Canada.

On July 28, Iranian Foreign Ministry spokesperson Esmail Baghaei held a press conference on the Iranian nuclear issue and the regional situation. Baghaei emphasized that Britain, France, and Germany have no right to use the snapback sanctions mechanism to pressure Iran. In response to continued pressure from the E3 (Britain, France, and Germany) and their threats to invoke the snapback mechanism to reinstate UN sanctions on Iran, Baghaei stated that during the previous round of negotiations, the focus of talks between Iran and the three European countries was on the nuclear issue and sanctions relief. Iran has consistently emphasized that European parties have no right to invoke this mechanism. If they abuse it, it will only complicate the nuclear issue further. Iranian Foreign Ministry spokesperson Esmail Baghaei noted: "The European parties have long attempted to exploit certain provisions of UN Security Council Resolution 2231 as bargaining chips to pressure Iran. In essence, the European parties have no authority to use this tool to reimpose sanctions. We made this clear in the latest round of negotiations and prior discussions. If the three European countries misuse this issue, they will face an appropriate response from Iran."

The ceasefire agreement between Thailand and Cambodia officially came into force at 24:00 on July 28th. In the afternoon of that day, Cambodian Prime Minister Hun Manet and Thai Acting Prime Minister Phumtham led senior delegations to attend a special meeting on the Cambodia-Thailand border situation held in Putrajaya, Malaysia. The Malaysian prime minister stated that both Thailand and Cambodia had agreed to the ceasefire, which would take effect at midnight (24:00 local time on July 28th). Later the same day, both Thai and Cambodian sides confirmed that they had reached a consensus on the ceasefire and would halt hostilities starting from midnight.

According to a report by Russia's Sputnik News Agency on July 28th, U.S. President Donald Trump said that due to a lack of progress in mediating the Russia-Ukraine conflict, he would shorten the previously set 50-day ceasefire period to 10-12 days. "I’m going to make a new deadline of about … 10 or 12 days from today," Trump told reporters during a meeting with British Prime Minister Keir Starmer. "There’s no reason in waiting… We just don’t see any progress being made." Earlier that day, Trump, who was holding talks in Scotland, said he decided to cut the original 50-day timeline due to disappointment with Russian President Vladimir Putin.

U.S. President Donald Trump announced on Monday that he plans to soon impose drug tariffs, though he did not specify a date. Trump met with British Prime Minister Keir Starmer a day after declaring a trade deal with the European Union. Following his meeting with Starmer in Scotland, Trump told reporters that he would announce something on drugs in the near future, and he had a major plan for pharmaceuticals, aiming to bring many drugs back to the United States.

In an article, Nick Timiraos wrote that Federal Reserve officials expect they will ultimately need to continue lowering interest rates, but they are not prepared to do so by Wednesday. Disagreements among them center on what evidence they need to see first and whether waiting for clearer conditions would be a mistake. Officials are now split into three camps over resuming rate cuts. The key focus will be whether Chair Jerome Powell signals a potential September rate cut in his press conference and whether his colleagues begin laying the groundwork for a rate reduction at the next meeting in the coming days and weeks.

UTC+8 13:30 France Q2 GDP First Estimate

UTC+8 16:00 Germany Q2 GDP First Estimate

UTC+8 17:00 Eurozone Q2 GDP First Estimate

UTC+8 20:15 U.S. July ADP Employment Change

UTC+8 20:30 U.S. Q2 Real GDP First Estimate

UTC+8 21:45 Bank of Canada July Interest Rate Decision

UTC+8 22:00 U.S. June Pending Home Sales Index MoM

SIA posted a net profit of S$186 million (US$144 million) for the quarter ending June 30, marking a significant year-on-year drop from last year’s performance. Operating profit also declined by 13.8% to S$405 million, reflecting higher cost pressures despite stable passenger and cargo demand. The company attributed the earnings deterioration to lower cash balances and the impact of falling interest rates on investment income.

A key contributor to the decline was SIA’s share of losses from associated companies, particularly Air India. In contrast to the previous year, when associate contributions boosted profits, this quarter reflected the financial burden of Air India, which was brought under SIA’s equity accounting framework in December 2024 following the merger of Vistara into the Tata Group carrier. SIA now holds a 25.1% stake in Air India.

Investors reacted swiftly to the disappointing results. SIA shares dropped as much as 8% intraday the sharpest fall since August 2024 before settling at a 7.11% loss. The stock's negative momentum reflects concerns that the integration with Air India may continue to weigh on SIA’s profitability in the near term, especially if restructuring costs and operational inefficiencies persist.

Moreover, the sharp drop in interest income raises questions about SIA’s liquidity management strategy amid a more dovish interest rate environment. With lower yields on deposits and investments, carriers like SIA that traditionally held significant cash reserves may face pressure to rebalance their capital allocation strategies.

Despite the earnings setback, SIA offered a cautiously optimistic outlook. The airline noted that demand for both passenger and cargo services remained robust, supported by resilient global travel appetite despite ongoing geopolitical uncertainties. Forward bookings and cargo volumes continue to trend positively, which could help buffer earnings in subsequent quarters if capacity and cost control measures are effectively managed.

While the first quarter results reveal short-term profitability challenges for Singapore Airlines, particularly due to associate losses and macro-financial headwinds, the underlying strength in travel demand offers a supportive backdrop for recovery. Nonetheless, investors will remain watchful of how the Air India partnership evolves and whether SIA can mitigate the risks of further financial drag while maintaining competitive operational margins.

I've been closely tracking the EUR/USD pair lately, especially after the European Central Bank’s recent tone shift. It’s fascinating to see how market expectations have evolved from no hikes at all this year to pricing in a December move. But let’s take a step back.

Well, ECB members have since been walking that back. Lagarde herself emphasized there’s "no need to rush to premature conclusions," and Villeroy de Galhau called market reactions “too high.” That commentary was enough to push the 1-year forward OIS down by 12bps to 0.00% a sign that traders are starting to temper their rate hike bets again.So where does this leave EUR/USD? We're now caught in a tug-of-war between tightening expectations and cautious ECB communication. Unless inflation data forces their hand, I don’t expect a broad trend breakout soon. Especially with 62% of December’s euro-area inflation tied to volatile categories like energy and food, the underlying core remains tame.

If you were expecting fireworks after the Bank of England's rate hike, you probably felt let down. I know I did.Despite a 25bps increase, GBP/USD actually slipped. And the pound lost over 1% against the euro. Why the underperformance?

The market had already priced in the move. More importantly, the details from the BoE’s Monetary Policy Report tell a more cautious story: tightening beyond current expectations could actually undershoot the inflation target.This is a critical point for traders. It’s not just about whether a central bank is raising rates it’s about the trajectory and the messaging behind it.

Chief Economist Huw Pill’s speech (titled “UK Monetary Policy Outlook”) further drove home that excessive tightening isn’t warranted. That’s why we saw the 1-year forward GBP OIS fall 11bps last week.So, while real yields still favor GBP/USD, broader growth risks like tax hikes and spiking energy bills are likely to limit upside potential. I’m staying nimble on this pair, especially ahead of upcoming UK retail and labor data.

In FX, narratives are changing fast. A central bank comment or a data surprise can reverse trends in a matter of hours. That’s why I stay grounded in both fundamentals and sentiment shifts. Right now, it feels like the market is hunting for clarity in a fog of conflicting signals.I’ll be keeping a close eye on upcoming inflation releases and central bank speeches this week particularly for signs that market pricing (especially in Europe and the UK) may be running ahead of policy reality.

Q1: Why did the EUR/USD rally stall after the ECB's hawkish comments?Even though ECB President Lagarde signaled a shift toward tightening, subsequent comments from other officials dialed back expectations. This inconsistency reduced momentum, and the market started to doubt whether the ECB would follow through aggressively especially given that eurozone inflation is still largely driven by energy and food.

Q2: If the BoE raised rates, why did GBP weaken?Markets had already priced in the BoE’s 25bps hike. More importantly, the Bank’s guidance emphasized that excessive tightening could actually harm the economy and undershoot inflation. This cautious tone weighed on the pound, despite a seemingly hawkish headline.

Q3: What does the BTP/Bund spread tell us about ECB policy risks?The widening spread between Italian and German bonds (BTP/Bund) signals stress in the periphery. If it continues, it could pressure the ECB to slow or adjust its tightening plans to avoid fragmenting financial conditions across the eurozone.

Q4: How do real yield spreads influence currency pairs like GBP/USD?In theory, higher real yields should support a currency. But in practice, broader economic concerns such as slowing growth, tax hikes, and energy costs can offset that support. That’s what’s happening with GBP/USD: strong real yields, weak price action.

Q5: What should traders focus on this week?Stay alert for speeches by central bank officials (BoE, Fed, BoC), inflation data releases (especially in the US and eurozone), and geopolitical developments. Markets are highly reactive to shifts in forward guidance, and volatility can pick up quickly when expectations change.

Brent crude hovered near $70 per barrel after a sharp 2.3% increase in the previous session, its largest two-week jump, while West Texas Intermediate (WTI) traded around $67. This upward momentum follows President Trump’s announcement of a 10–12 day deadline for Moscow to cease military operations in Ukraine or face new U.S. sanctions, including potential “secondary sanctions” that could affect non-Russian entities engaging in oil trade with Russia.

Markets have interpreted this stance as a precursor to further supply disruptions from Russia, a key member of OPEC+ and one of the largest global oil exporters. Trump’s public frustration with President Vladimir Putin marks a renewed hardline approach after previous diplomatic attempts yielded no significant progress toward a ceasefire.

The threat of U.S. secondary sanctions builds on fresh EU penalties against Russian-linked companies, including India's Nayara Energy, and adds another layer of uncertainty to oil supply chains. This comes at a time when global inventories are already tightening due to summer-driven demand peaks in the Northern Hemisphere. Refineries are running near full capacity in several Asian and U.S. regions, drawing down stocks of gasoline and diesel.

Oil's rally is also underpinned by the August 1 trade deadline for several U.S. agreements and anticipation surrounding the upcoming OPEC+ policy meeting. The cartel is set to decide its production strategy for September, with analysts divided on whether output will be held steady or slightly increased. A conservative production stance by OPEC+ in light of Trump’s threat could further bolster oil prices in the short term.

Despite recent price support, the oil market faces the possibility of oversupply in Q4 if OPEC+ continues to raise production and global demand begins to plateau. The International Energy Agency (IEA) and other forecasters have warned of a potential return to surplus later this year, especially if Chinese consumption weakens or if macroeconomic uncertainty limits industrial activity.

However, the immediate focus remains on Russia’s compliance with U.S. pressure. Should Moscow ignore Trump’s deadline, broader sanctions could cut into Russian crude exports likely forcing refiners in Asia to seek alternative sources, tightening supplies in key regions. Conversely, a swift truce could alleviate supply concerns and trigger a retracement in prices.

Traders will closely monitor diplomatic developments in the next two weeks as well as signals from the upcoming OPEC+ meeting. In the interim, geopolitical tensions are expected to keep crude prices supported, but underlying fundamentals suggest limited room for sustained upside unless further supply shocks occur.

The European currency suffered its steepest one-day drop in over two months, falling 1.3% on Monday and hovering near $1.1594 on Tuesday morning in Asia. The immediate trigger was the backlash from European leaders against the recently announced U.S.-EU trade deal, which imposes a 15% tariff on most EU goods. French officials denounced the agreement as a betrayal of European interests, calling it a “dark day,” while German Chancellor Friedrich Merz warned of “significant damage” to Germany’s export-reliant economy.

This political dissatisfaction swiftly translated into bearish sentiment in financial markets. As euro-area government bond yields fell, traders reduced exposure to the euro, shifting capital toward the dollar as a safe haven.

The euro's slump coincided with a sharp rise in the dollar index, which climbed 1% overnight and stabilized around 98.67. The euro's underperformance also spilled over to other currencies. Sterling fell to a two-month low at $1.3349, while the Japanese yen remained flat around 148.49. This price action reflects a consensus that, despite superficial progress, the deal has not improved growth prospects for the eurozone and may worsen them.

As Ray Attrill from National Australia Bank explained, the trade agreement may appear to signal cooperation, but its tangible effects undermine European economic recovery, especially at a time of weakening industrial production and subdued consumer demand in the region.

President Trump’s rhetoric has further complicated the global outlook. He warned that trading partners without specific bilateral deals with the U.S. would soon face tariffs of 15–20%, far higher than the blanket 10% tariff set in April. This aggressive trade posture reinforces the perception of a protectionist U.S. strategy and may further depress trade activity with Europe.

Meanwhile, global currency traders remained cautious ahead of key interest rate decisions from the Federal Reserve and the Bank of Japan later in the week. Although no changes are expected, any hints about policy direction especially from the Fed could influence dollar strength and emerging market stability.

The euro’s sharp reaction underscores the market's concern about Europe’s vulnerability in an increasingly unilateral global trade environment. The imbalance in the U.S.-EU deal, combined with heightened trade uncertainty and weak eurozone fundamentals, creates downward pressure on the euro and casts doubt on any near-term economic revival.

Unless the European Union can counteract these external pressures with cohesive fiscal policy or stimulus measures, the bloc may continue to face capital flight and a weaker currency. Investors will closely watch ECB commentary in the coming weeks for any signal of countermeasures to offset the trade-driven drag on growth.