Equities: A Healthy Correction, Not a Trend BreakMajor US equity benchmarks finished last week on the back foot, with the Nasdaq 100 down 4.2%, and the S&P 500 shedding 2%. Yet, despite the headlines, this is likely just a healthy correction within an otherwise trending market. The weekly chart of the S&P 500 demonstrates this in the form of a potential bullish pennant pattern between the all-time high of 7,620 and the low of 7,237.The main drivers included selling pressure in the technology sector – the Philadelphia Semiconductor Index (SOX) lost 8%, marking its biggest weekly loss since April – a hawkish Fed, and rising geopolitical tensions. Markets were also rattled by Apple’s (NASDAQ:AAPL) price hikes, adding to the tech sell-off amid margin pressures and, of course, reports of an OpenAI IPO delay.Oil Retreats and Yields Bull SteepenIn the commodities complex, oil notched a third straight week of losses amid easing supply concerns and rising shipping volumes in the Strait of Hormuz. In the fixed income space, US Treasury yields bull steepened last week amid lower oil prices and optimism that the drop in energy costs will eventually feed through to inflation this year.However, over the weekend, the US and Iran exchanged fresh blows, with each side blaming the other. President Trump has also recently said: ‘There may come a point when we are no longer able to be reasonable, and will be forced to militarily complete the job that we very successfully started. If that happens, the Islamic Republic of Iran will no longer exist!’ Importantly, though, Hormuz traffic held up, even as regional security agencies have raised the threat level.That makes this week’s open more headline-sensitive, but any real disruption to transits in the Strait could quickly unwind last week’s drop in oil and yields.Last Week’s Data Round-UpIn terms of last week’s data, this was a mixed bag for me. First up was the May Canadian CPI inflation report, which saw YY headline inflation beat at 3.2% (up from 2.8% in April), while the BoC’s preferred core measures – trim and median – came in line at 2% and 2.1%, respectively.The May Australian CPI inflation landed mid-week, and showed YY headline ease to 4% (from 4.2%), while the YY trimmed-mean CPI came in higher at 3.6%, surpassing the 3.5% consensus and April’s 3.4% reading. The May Australian jobs report also revealed job growth of 40.3k, though mostly part-time, and household spending surprised to the upside.Finally, we had the May US PCE inflation report at the tail end of the week, matching expectations at 4.1% YY headline/3.4% core, both at multi-year highs and keeping Fed hike risk alive.Week Ahead: Quarter-End Flows, US Jobs & SintraThis week’s market marks the end of the month, end of quarter, and end of half-year flows. As such, there will be some rebalancing, and because stocks have done well, some institutions will have to sell shares and buy bonds. US banks will also be closed on Friday in observance of Independence Day; therefore, liquidity could be thin at the tail end of the week.We also have a busy data slate to get our teeth into, including eurozone CPI inflation and a slew of US jobs releases. Additionally, several central bank figures speak at the ECB Forum on Central Banking in Sintra, Portugal, this week, including new Fed Chairman Kevin Warsh and ECB President Christine Lagarde.USD: Hawkish Fed, but Stretched PositioningThe USD strengthened meaningfully versus G10 peers last week, notching a second consecutive week in the green. This has been underpinned by the Fed’s recent hawkish tilt, with 9 of the 18 members opting to hike rates by year-end. 2026 PCE inflation projections were also revised higher to 3.6% (headline) and 3.3% (core). This provides a supportive backdrop for the USD, with the OIS curve pricing 15 bps of tightening by year-end.Positioning, however, is overstretched to the upside for the USD. In fact, it is one of the most overextended currencies in developed markets right now. Obviously, if we do not see the Fed raise rates, or they suggest no hikes are on the table, a meaningful push lower at the front end of the yield curve will materialise, and the USD will depreciate.For the US this week, it is all about the jobs data. Strong numbers would reinforce the Fed’s hawkish stance, likely pushing US yields higher and further bolstering the USD, while weaker data could have the opposite effect. The latter may also offer more exaggerated moves due to positioning. Stretched positioning does not invalidate a trend, but it raises the odds of sharp, news-driven snapbacks against the trend in response to any surprise.EUR: Eurozone CPI in Focus as Fed-ECB Divergence WidensWe will be getting the June preliminary estimate for eurozone CPI inflation this week, with early estimates suggesting that the YY headline will ease to 3% from 3.2% in May, while YY core – which excludes food, energy, alcohol, and tobacco – is expected to remain unchanged at 2.6%.I want to highlight the divergence between the Fed and the ECB, with the latter shifting to a more cautious stance following its rate hike earlier this month, as President Lagarde pushed back against further aggressive action. Notably, markets have scaled back their year-end ECB rate hike bets to 27 bps, down from about 50 bps a month ago, largely in response to lower energy prices. The dovish ECB repricing coupled with hawkish Fed pricing is one of the driving factors behind EUR/USD’s decline this month, which is down 2.4% MTD, leaving the EUR overstretched to the downside.Any softness in the eurozone inflation data reinforces Lagarde’s recent comments and could add to EUR weakness, while hotter numbers open the door for investors to fully price in a September meeting hike, potentially seeing the EUR turn higher. Another important event to keep a close eye on is the ECB Forum this week, which could provide insights into the policy paths of the ECB and the Fed.