Global Macro Commentary: July 1: AI Rotation, Stronger Dollar

Research evidence excerpt

Global Macro Commentary: July 1: AI Rotation, Stronger Dollar

Update

July 1, 2026 10:52 PM GMT

Morgan Stanley & Co. LLCMGlobal Macro Commentary | North America Molly Nickolin

Strategist

July 1: AI Rotation, Stronger Molly.Nickolin@morganstanley.comLingdi Xu +1 212 761-3592

Economist

Lingdi.Xu@morganstanley.com +1 212 761-2957

Dollar Sofia Palacios

Sofia.Palacios@morganstanley.com +1 212 761-0428

Warsh remarks temper hike fears; US ISM misses; oil extends

Morgan Stanley Asia Limited+

decline; AI momentum unwinds; EMFX gives back 2026 gains; Gek Teng Khoo

DXY at 101.39 (+0.2%); US 10y at 4.48 (+1.4bp). StrategistGek.Teng.Khoo@morganstanley.com +852 3963-0303

Markets started the quarter with stronger USD, modestly higher long-end yields, Morgan Stanley MUFG Securities Co., Ltd.+

and concentrated equity weakness as investors balanced softer inflation signals Hiromu Uezato

against resilient labor data. Hiromu.Uezato@morganstanleymufg.com +81 3 6836-8431

Developed Markets Morgan Stanley India Company Private Limited+

Nimish M Prabhune

• US rates twist-steepened as Fed Chair Warsh acknowledged lower Strategist

Nimish.Prabhune@morganstanley.com +91 22 6996-1862

inflation risks but avoided giving guidance on the next policy move. The

front end held broadly unchanged while the long end cheapened modestly Morgan Stanley & Co. International plc+

Jasper Knyphausen (2y: +0.2bp; 30y: +1.9bp). Softer ISM details supported the front end, with

manufacturing at 53.3 versus 53.9 expected and prices paid falling to 73.0. Jasper.Knyphausen@morganstanley.com +44 20 7425-2185

Treasuries initially rallied after Warsh’s remarks, but yields drifted back

higher into the close ahead of Thursday payrolls. Oil declines also limited the

inflation-compensation impulse, though duration demand remained