G3 divergence: EZ best, China worst, US outlook suits steepeners - July G3 Leading Indicator Watch

New Ideas: USD 2s10s steepeners (2s10s 1y forward remains inverted)

Update: Stick with pro-cyclical Eurozone trades such as long EURUSD, long EURCHF

Summary by Region

• Global: China remains bad outlier, EZ & US LEI recovery continues
• US: Sideways growth, ISM vs S&P services PMI gap a known issue. Consumer & labor deep-dives suggest reduced left tails. Inflation outlook not smooth sailing, but enough room for Fed “hawkish” cut if needed. 2s10s 1y forward remains inverted => steepeners now a better proposition for US macro outlook.
• China: Growth and inflation leading data continues to deteriorate, investors remain in “show me” mode. Unofficial sources of FX support likely exhausting, expect slow and managed RMB depreciation.
• Eurozone: Still unambiguous improvement in growth leading data. Inflation under control as services price survey drops further.