LOOK AHEAD: US Macro Week Ahead: CPI and PPI Loom Large

In an Aug 5 speech, Fed Gov Cook (permanent FOMC voter) repeated her view that she is "prepared to act by raising rates, if necessary" as "inflation is too high, and I consider the risks to the inflation side of the dual mandate higher than the risks to the employment side at this point".

• We last heard from Cook on Jul 15 when she said "I see it as prudent to give a bit more time to observe how inflation unfolds from here... [but] if we do not see signs of disinflation soon, I am prepared to act" - so this isn't a major change in her view.
• In her latest comments, she notes "the labor market has remained resilient over the past year" while overall economic growth remains "solid".
• But even as she warns that she could be compelled to support a hike, she concludes on something of a dovish note in pointing out that there's still a path for disinflation to avert the need to tighten: "the labor market and output growth are currently stable. I would consider how a rate increase could negatively affect that stability. Still, I would support an increase, if it becomes necessary to bring inflation down. It may not. Some disinflationary forces are already in play, which could push inflation toward our target without a rate increase."
• Those disinflationary factors include "the effects of tariffs announced last year on the price level are mostly behind us"; "while oil prices continue to be elevated relative to early this year because of the Middle East conflict, many forecasters suggest that they will come down by the end of the year, providing some deflationary relief"; and " As supply chains adjust and sector-specific efficiency gains accrue, I believe some of the inflationary pressure coming from the AI buildout will ease."
• "For these three reasons, I felt it was appropriate not to change rates [including at the July FOMC where she voted for a hold] while we see how these factors evolve. If I do not see signs of continued disinflation soon, I am prepared to act."
• She's a permanent voter and probably one of the 9 FOMC members who penciled in at least one hike by end-2026 (though probably just one hike, alongside two of her colleagues, but not as aggressive as the 6 who saw 2 or more hikes). How "soon" she needs to see signs of continued disinflation is the question.

• RES 4: 1.4292 61.8% Retracement Feb’25 - Jan’26 downleg
• RES 3: 1.4264 1.618 proj of the Mar 9 - 31 - May 1 price swing
• RES 2: 1.4248 High Jun 24, 25 and 30 and the bull trigger  
• RES 1: 1.4129/4190 High Jul 28 / 9  
• PRICE: 1.4018 @ 16:42 BST Aug 05
• SUP 1: 1.3991 Low Jul 30
• SUP 2: 1.3981 38.2% retracement of the May 1 - Jun 24 bull cycle  
• SUP 3: 1.3951 Low Jun 15
• SUP 4: 1.3899 50.0% retracement of the May 1 - Jun 24 bull cycle 

The USDCAD trend structure remains bullish and the bear cycle since Jun 24 is considered corrective. Attention is on the next important support at 1.4036, the 50-day EMA. It has been pierced but - for now - remains intact. A clear break of it would signal scope for a deeper correction and open 1.3981 initially, a Fibonacci retracement. Key resistance and bull trigger is 1.4248, the Jun 24, 25 and 30 high. First resistance is at 1.4129, the Jul 28 high.  

• Treasuries look to finish near steady to mildly higher Wednesday, inside session range as US/Iran deal optimism vacillated.
• Treasuries inched off midday lows following the latest Iran headlines - for what they are worth - that Iran has received messages that US is "ready to return to it's pledges" - that in itself "is not enough" to reopen the strait, followed by a even less optimistic headline that ther have been "no talks with the US ... in recent days".
• Currently, TYU6 trades +1 at 108-28 vs. 109-01 high, yield +.0082 at 4.6208%. Key resistance is 109-08, the 5–day EMA. Projected rate hike pricing consolidating vs. late Tuesday levels (*): Sep'26 at +13.7bp (+14.5bp), Oct'26 at 20.4bp (20.9bp), Dec'26 31.3bp (+31.8bp), Jan'27 33.9bp (34.9bp).
• The services PMI saw a solid upward revision in its final July reading and an unexpected one considering Monday’s manufacturing report had been only revised marginally higher. Services PMI: 54.6 (cons 53.6, flash 53.6) in July after 51.2 in June - strongest since Oct 2025
• ADP employment was softer than expected as it increased 44k in July (sa, cons 65k) after a marginally downward revised 95k (initial 98k) in June, seeing its softest monthly increase since January.
• Cross asset update: Stocks are mixed late Wednesday, paring gains after the DJIA and SPX emini indexes climb to new record highs in the first half (54744.33 and 7820.25 respectively). Sentiment gradually cooled as the day wore on with no announcement of a verified deal - the Nasdaq trading in the red at approximately 26444.0 vs. 26739.0 high (still shy of early July record high of 27093.0).
• Crude weaker: WTI Sep 26 is down by 0.7% at $75.2/bbl.
• Look ahead: ​Italy industrial production, GB construction PMI, EU Retail Sales, Mexico rate annc. Main focus remains on Friday's July employment report for the US.