Hopes of Another Ceasefire as Data Shows Sentiment Boost During the Last One
July 21, 2026
Iran and the United States traded military strikes for a tenth straight day even as lagged economic data underscore the economic benefits of the last ceasefire. Meanwhile, market participants wonder how much longer central banks will wait while the war remains unresolved. The current price of West Texas Intermediate crude oil, $84.60 per barrel, represents today’s high and exceeds Monday’s closing level by 1.7%. The Houthis in Yemen aim to block the Bab-el Mandeb Strait that connects the Red Sea and Gulf of Aden that if accomplished would put an additional constraint on global energy supplies. Meanwhile, there is a report that diplomatic mediators are scrambling to find enough common ground for an agreement on a new 10-day ceasefire in hostilities.
The National Bank of Hungary’s key interest rate today underwent its second 25-basis point reduction in a row. The decision, albeit not without some risk, was the expected one and accompanied by hint of yet another cut in August. The argument for monetary easing is that Hungarian consumer price inflation slowed further in June to 1.7%, which is lower than the MNB’s target range of 2-4% and down from a peal of 25.7% at the start of 2023. The interest rate back then had been jacked up as high as 13.0%. A series of cuts began in October 2023 that by September 2024 had halved the interest rate to 6.5%, but with inflation reversing from 3.0% in September 2024 to 5.6% in February 2025, no further rate changes had been made until June 2026. The danger surrounding rate normalization at this time in spite of sub-target CPI inflation is that the Middle Eastern war, while not discernibly lifting inflation in Hungary, has subjected the economy’s currency to downward pressure. Against the euro, the forint fell about 3.7% from 349.3 on June 16 to 362.9 on July 17. A weaker forint would magnify the latest upward pressure affecting world oil prices.
Hungary’s lower central bank interest is out of step with what other central bank authorities are contemplating. Policy interest rates at the Reserve Bank of South Africa and Bank Indonesia are each widely expected to be increased by 25 basis points later this week. The market consensus regarding the European Central Bank’s rate announcement on Thursday is that the current level will be retained, but the tone of ECB President Lagarde is liable to be more hawkish than before. The really big trend-setter will be the FOMC at next week’s policy review. A rate hike then is thought not to be in the cards, but like the ECB, rhetoric at that event is apt to indicate a rising tide of support for rate increases later this year.
Dollar movements overnight were again trivial, and the weighted DXY dollar index is unchanged from yesterday. Ten-year sovereign debt yields have climbed three basis points in Japan, two bps in France and a basis point in the United States, Germany, Italy and Spain. Japan’s Nikkei did not trade during yesterday’s Marine Day holiday bit today jumped by 3.3%. Big gains were also made in the Asian stock markets of China, Taiwan, South Korea, and Indonesia today. There’s been scant net movement in share prices in Germany, France or even Great Britain (despite the installation of a new prime minister), while the Italian and Spanish bourses show gains of about a half percent so far. A 1.2% rise in Nasdaq futures leads an attempt for U.S. stocks to recover from their recent difficulties. Precious metal prices are up, and Bitcoin touched its best level since June 2.
Andy Burnham was sworn in as the seventh British prime minister during the decade since the ill-advised Brexit referendum held in 2016 that approved the country’s subsequent exit from the European Union. Burnham chose former Defense Secretary John Healey to fill the all-important slot of Chancellor of the Exchequer. Fiscal policy is apt to be more stimulative, with a focus on defense spending.
More price data around the world got reported this Tuesday.
- Lebanese consumer price inflation fell back to a 3-month low of 17.3% in June from 19.0% in May, 20% in April and a 1-year low of 10.9% in January. The CPI had been as high as 268.9% in early 2023.
- Hong Kong CPI inflation of 2.0% in June matched May’s reading but was above a trio of 1.7% in the prior three months and a low last July of 1.0%.
- In New Zealand, which reports CPI inflation on a quarterly basis, such accelerated in 2Q to a ten-quarter high of 4.1% from 3.1% in the first quart of this year, as consumer prices leaped 1.5% on a quarter-on-quarter basis.
- Slovenian producer prices rose 0.5% on month and by 3.4% year-on-year in June, the most in 35 months and a complete reversal from a reading of -3.5% in February 2024.
- Latvian producer price inflation of 3.3% was the most in 16 months and up from 2.0% in May, 0.7% in April and -0.1% in March.
British unemployment averaged a lower-than-forecast 4.9% in the three months through May. On-year growth in average wage earnings of 4.3% overall and 3.4% excluding bonuses compared to 3.9% and 3.6% in the previous three months ending in February.
The German ZEW Institute’s monthly survey of investors revealed a much sharper-than-anticipated revival of sentiment regarding the near future of Euroland’s economy to a reading of 23.4 in July from 9.5 in June, -9.1 in May and -20.4 in April but still below the pre-Iran conflict’s readings of 39.4 in February and 40.8 in January. The reading on expected inflation dropped to 10.4 in July from 45.8 in the prior survey and 65.3 in May. Germany’s expectations index likewise improved to 26.3 this month from 10.5 in June and -17.2 in April but began this year at 59.6 in January. Current conditions remain considerably worse than expectations with July readings of -37.7 in the euro area and -77.6 in just Germany.
Dutch consumer confidence improved seven index points in June to a 3-month high but still bearish score of -39.
In Switzerland, which at times had one of Trump’s highest tariff levies among European economies, the trade surplus of CHF 23.3 billion in the first half of 2026 was 24% narrower than a year earlier. Spain’s trade deficit in the first half of EUR 25.1 billion was 16.5% bigger than a year before.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: British labor market statistics, German and Euroland ZEW expectations, National Bank of Hungary
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