All eyes on US inflation

In focus today

In the US, focus will be on the July CPI report. We forecast headline inflation at 0.2% m/m SA (prior: 0.3% m/m), and core inflation slightly higher at 0.3% m/m SA (prior: 0.2% m/m). With markets now pricing in a September rate cut after a weak jobs report, the CPI will offer crucial insights for the Fed's upcoming decision.

Also on the agenda today is the release of the NFIB small business optimism index, and remarks from the Fed's Barkin in the afternoon.

In Germany, focus turns to the ZEW index for August. The recent months have shown a clear rebound in the assessment of the current situation and expectations. It will be particularly interesting to see how the expectations component fared in August following the US-EU trade agreement.

Economic and market news

What happened overnight

In the US, Trump has extended the US-China tariff truce by 90 days, delaying triple-digit duties until early November. Officials from both nations see this as a step towards stabilising the global economy and remain cautiously optimistic about reaching a broader trade agreement later this year.

Additionally, E.J. Antoni of the conservative think tank Heritage Foundation has been nominated to chair the Bureau of Labor Statistics. This follows the dismissal of the former commissioner after the latest jobs report. His appointment awaits Senate confirmation. The Senate is currently on recess until September.

In Australia, the Reserve Bank of Australia (RBA) cut its cash rate to 2.60% (prior: 2.85%), aligning with both our forecast and consensus.

What happened yesterday

In Norway, core inflation came in unchanged at 3.1 % in July (cons: 3.0 %), aligning with Norges Bank's June MPR forecast. This supports the case for a September rate cut. Looking at the details, food inflation rose unexpectedly, with imported inflation also slightly higher. On the other hand, service inflation, especially ex. rent, was lower than anticipated.

In Denmark, inflation came in higher than expected at 2.3% y/y in July (cons: 1.7%, prior: 1.9%), driven by sharp increases in travel, hotel, food and electricity prices, while lower petrol prices provided some relief.

Danish export data showed stable exports to the US despite higher tariffs and a weaker dollar. However, uncertainty persists with a new tariff rate from August and potential future measures on medicine.

Equities: Equities were muted on Monday, with major indexes edging slightly lower (S&P 500 -0.3%, Stoxx 600 -0.1%). Sector preference tilted defensive, with health care and banks performing well - both of which remain our preferred low-beta top pick looking ahead. The fact that global cyclicals have returned over 10% in the past three months, while defensive stocks have been flat, is striking. Valuation would favour a defensive breather, which explains sessions like yesterday. Still, we believe macro momentum remains too strong to fully support that shift. However, if we are wrong on inflation or the US job market, the current valuation discount would, of course, amplify the moves in the opposite direction.

FI and FX: Global yields consolidated in yesterday's session, with no major catalysts. In both the US and the euro area, yields were broadly unchanged. In FX, it was a quiet start to the week. The NOK outperformed following a slightly higher-than-expected July CPI print in Norway, pushing EUR/NOK toward the 11.90 mark. Elsewhere, the USD posted broad-based gains across the G10. EUR/USD edged lower toward 1.16 ahead of today's key US July CPI release. EUR/CHF also moved higher, continuing to trade above 0.94, as Switzerland remains among the hardest-hit economies by the 39% US tariff on its exports.