ETFs may see two major catalysts before the end of the year

Energy prices turned positive for the first time since November 2025, as Middle East conflicts have driven crude oil costs beyond the government's subsidy hedging range. Wholesale inflation in July reached 7.2%, with electricity costs being the largest contributor, indicating that energy costs have been accelerating from the production end to consumers. Fresh food prices surged by 7% year-on-year, nearly double the rate of the previous month. The stronger data confirms official warnings and further strengthens market expectations that the Bank of Japan may accelerate the tightening of monetary policy.

As the market gradually digests expectations of a more dovish stance from the Federal Reserve, factors related to the midterm elections, and news that the U.S. Treasury may increase bond buybacks, Citi's FX strategy team has recently turned bearish on the short-term outlook for the U.S. dollar.