Tonight at 8:30, CPI—life-or-death for the market! Overall inflation may be seen turning negative for the first time, but the core data is the real bomb.

Brothers, tonight at 8:30, the U.S. June CPI data is about to be released—this is the most important “bomb” for the markets this week.

Core data preview:
Market consensus expects that, driven by a sharp drop in June oil prices, headline CPI year-over-year will fall from 4.2% to 3.8%. The month-over-month figure is also expected to decline by 0.1%, which would mark the first monthly negative growth since the COVID-19 outbreak in 2020. On the surface, inflation is finally cooling down.

But the real test is core CPI—excluding food and energy. Core CPI year-over-year is expected to slip only slightly from 2.9% to 2.8%, while month-over-month is still expected to rise by 0.2%. The annualized growth rate of services inflation is 3.4%, far above the 2.6% average level seen before the pandemic.

The Fed’s megaphone, Nick Timiraos, has already issued an early warning: for the Fed, core indicators matter far more than the overall data.

Waller has already made his move:
Federal Reserve Governor Waller signaled ahead of time on Monday—if core inflation runs hot again, the FOMC will consider tightening monetary policy in the near term. Data from the money markets shows that the probability of a July rate hike has surged from 25% a week ago to nearly 50%.

Tonight’s data may directly determine whether the July 29 FOMC meeting will include a rate hike.

Personal view: The cooling of headline CPI is something within expectations, but core CPI is what the Fed is truly watching—if core CPI comes in above expectations by 0.3% or more, the market will immediately trade the rate-hike logic. BTC and risk assets will likely continue to face near-term pressure. Tonight is destined to be anything but calm—if you have positions, make sure your risk controls are in place, and don’t get chopped up back and forth in the data-driven market.

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