Trouble All Over
July 24, 2026
Resumed active conflict raged into a 13th day in the Middle East as Iran targeted U.S. military installations in the Gulf region. Scant traffic is getting through either the Strait of Hormuz or the Bab el-Mandeb Strait.
On a separate front of mischief, plan B of President Trump’s tariff offensive was launched, imposing a 10-12.5% levy on virtually all imports into the United States.
Yesterday’s steep spike in the price of oil has been trimmed. West Texas Intermediate crude fell 2.5%, but at $89.93 per barrel is 14% higher than a week ago and 57% above the level at the start of this year. June data showing some disinflation should be viewed with a grain of salt.
Nevertheless, central banks cut interest rates today in both Russia and Kazakhstan, each by 25 basis points. On deck with monetary policy meetings scheduled for next week are the Federal Reserve, Bank of England, and Bank of Japan.
Yesterday the U.S. Treasury published its semi-annual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. It maintains the same list of ten countries meriting close attention: China, Japan, Korea, Taiwan, Thailand, Singapore, Vietnam, Germany, Ireland, and Switzerland. Regarding the Japanese yen, the report notes
The extent of real effective depreciation and of bilateral depreciation against the dollar between end-2011 and end-April 2026 (both 51%) has resulted in substantial yen undervaluation. Indeed, yen weakness has persisted despite a narrowing of U.S.-Japan interest rate differentials. While global factors such as financial market volatility and oil prices have likely affected the yen, excess volatility in the yen is undesirable ….Monetary policy normalization would help anchor inflation expectations and reduce excessive exchange rate volatility.
Overnight action saw the dollar experience hardly any net movement against the euro, yen, sterling, Swiss franc or Canadian dollar, but some significant losses occurred of 0.9% against the South Korean won, 0.5% versus the Indonesian rupiah and 0.4% relative to the Indian rupee.
Ten-year sovereign debt yields declined by five basis points in the U.K. four bps in Switzerland, three bps in France, Italy and Spain and two basis points in the United States and Germany. Alternatively, 10-year yields rose ten basis points in Australia and three bps in Japan.
While stock markets closed out the week with Friday losses of 2.7% in Japan, 1.6% in China, 2.7% in Taiwan, 5.7% in South Korea and 1.9% in Indonesia, those in Europe are flashing green. In the United States shortly after the opening bell, the Russell 2000 (+0.2%) and Nasdaq (-0.6%) had moved in opposite ways, while the DOW and SPX were barely changed.
Preliminary purchasing manager survey results for July and compiled by S&P Global were published today:
- U.S. composite and service sector readings improved sharply to 8-month highs of 53.6, while the manufacturing score edged 0.1 point lower to a 4-month low of 53.8.
- All three Euroland readings exceeded expectations, including a 5-month high 51.9 score in the composite index. Demand conditions improved, while inflation appeared to cool. Conditions contrasted with a stagnant second quarter but should be viewed with caution due to the recent re-escalation of geopolitical headwinds.
- The German compositie PMI moved above the 50 neutral level to a 4-month high. The French composite score climbed 2.4 points to a 5-month high but stayed slightly in weakening territory at 49.6.
- India’s composite PMI sank almost three full points to a 52-month low of 54.3 and undershot consensus expectations.
- Japan’s composite PMI reading of 53.1 was its highest score in 15 months.
- A 52.6 composite reading in Australia showed the fastest growth since January.
New home sales in the United States outperformed expectations with a 1.6% increase after May’s 4.3% drop.
Consumer sentiment in Great Britain rose five points this month to a still negative reading of -17. The German consumer confidence index slid slightly further below zero to -29.6.
In the Czech Republic, consumer sentiment eased to a 2-month low, while business sentiment rose to a 3-month high in July. Belgian business confidence rose to a half-year high but remained in pessimistic territory at -11.9.
Several countries released producer price figures. The Canadian PPI posted the largest month-on-month decline (-1.4%) in two and a half years but remained 12.4% higher than a year earlier. Swedish producer price inflation of 7.4% in June constituted a 40-month high and quite a turnaround from the 7.1% on-year drop at end-2023. Finnish producer price inflation slid back from May’s 39-month high of 7.4% to a 2-month low in June of 6.7%. Spanish producer prices remained unchanged from May’s level, resulting in a 3-month low year-on-year 7.0% reading after May’s 41-month high of 10.5%. And in Chile despite a slight retreat to 19.7% in June from 20.5% in May, the latest producer price inflation reading was in double digits for a seventh straight time and up from 1.6% in May 2025.
As expected, the Central Bank of Russia policy interest rate was sliced by another 25 basis points to 14.0% at today’s scheduled review. The rate has altogether been lowered so far this year by 200 basis points on top of the 500-bp reduction engineered in the last seven months of 2025. Officials released an explanation of today’s action, noting that “Considerable price growth and higher inflation expectations in the summer months were mainly associated with one-off factors. Measures of underlying inflation remain within the range of 4–5% in annualized terms.” Russian consumer prices were 6.0% higher than a year earlier in June, still well below the new policy rate level. Economic growth earlier this year was stagnant in Russia.
At the National Bank of Kazakhstan, officials also cut the policy interest rate by 25 basis points, but their decision had not been foreseen. The rate had been slashed by a full percentage point at the previous review in June, and Kazakhstani CPI inflation remains in double-digit territory at 10.3%. The new rate level matches the 16.75% level that had prevailed from December 2022 until August 2023. Even as they cut the rate today, officials conceded that inflation risk remains skewed to the upside.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: British and German consumer confidence, Central Bank of Russia, July preliminary purchasing managers surveys, National Bank of Kazakhstan
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