The economic backdrop remains resilient, but investors continue to position defensively.

Let's start with the data.

US inflation came in softer than feared.

Core CPI slowed to 0.2% m/m versus 0.3% expected, while Core PPI also undershot forecasts at 0.4%.

At the same time, growth held up.

Consumer sentiment improved to 48.9 from 44.8, while inflation expectations fell to 4.6%.

• Inflation pressure is easing
• Consumer confidence is stabilising
• The economy is not rolling over

Europe showed a different picture.

The ECB raised its Main Refinancing Rate to 2.40%, reinforcing its commitment to containing inflation despite slowing growth concerns.

The UK weakened.

GDP contracted by -0.1% m/m, highlighting the fragile nature of UK growth despite inflation remaining above target.

What does this tell us?

Positioning remains cautious.

AUD and EUR longs are being cut aggressively.

GBP shorts are rebuilding.

JPY shorts continue to increase as carry trades remain attractive.

Meanwhile, oil longs continue to unwind as geopolitical risk premiums ease.

The one notable exception is equities.

S&P 500 shorts were reduced despite volatility, suggesting investors are becoming less bearish on risk assets.

• Inflation → easing
• Growth → resilient but uneven
• Policy → restrictive
• Positioning → defensive

That creates an interesting divergence.

The data is improving.

Positioning remains cautious.

Looking ahead, next week becomes critical.

• BOJ Rate Decision
• RBA Rate Decision
• UK CPI
• Federal Reserve Rate Decision
• BOE Rate Decision
• US Retail Sales

Can central banks acknowledge easing inflation without undermining confidence in growth?

If they can, risk assets may continue higher.

If policymakers remain aggressively hawkish, markets may begin reassessing valuations.

So while the macro backdrop has improved, investors remain unconvinced.

Growth is holding.

Inflation is easing.

Central banks remain cautious.

And positioning suggests many investors are still preparing for risks that have yet to materialise.