Post

Before the CPI release, as I mentioned in my content yesterday, the market is gradually decompressing. One direction of decompression is energy prices, and the other is the July CPI data. Although the US-Iran situation caused a short-term rebound in energy, the negotiation window between the US and Iran has not closed. The short-term tension remains, but optimism is still preserved. With energy prices stabilizing, the market is anchoring its focus on tonight's CPI for pricing and trading. Before the data release, the dollar and bond yields are both declining, and the US stock market is performing well in pre-market trading. Clearly, this is trading on the expectation of moderate inflation data. What exactly is moderate inflation data? Nominal inflation year-over-year and month-over-month rates, as well as core inflation year-over-year and month-over-month rates, meeting expectations. As long as tonight's data meets expectations, the market will receive a moderate inflation report. However, it is important to note that the market has already priced in the data in advance. Once the data meets expectations, the pricing logic will reverse: the dollar may slightly rebound and gain support, bond yields may temporarily stop falling and stabilize, and the optimistic rebound in US stocks will continue into the first half of the session. The core focus of tonight's data is not the nominal CPI but the core CPI data, specifically the month-over-month change rather than the year-over-year rate! There are two layers of focus tonight: nominal CPI month-over-month to see if June's moderate inflation decline continues, and whether international energy fluctuations have a secondary transmission effect on inflation. Secondly, the core CPI month-over-month: the market wants to see whether the main factors causing inflation stickiness or a slight rebound come from energy, food, or service sector inflation and housing. If the core CPI remains strong, it will trigger inflation concerns and increase the probability of rate hikes. #TonightCPI