🔔Major CPI data is set to hit tonight, alongside the Fed hearing by Powell—will the market find a turning point?

U.S. CPI data will be released at 8:30 pm tonight:

1. CPI YoY (not seasonally adjusted): prior value 4.20%, forecast 3.8%;
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2. Core CPI YoY: prior value 2.90%, forecast 2.8%;

The market overall is pricing in that inflation will continue to cool, which would prompt the Federal Reserve to begin a rate-cut cycle—bullish for the market.

Core CPI vs. expectations: core CPI is below expectations:

1. Macro logic: the downward momentum of inflation is stronger than the market imagined. The market will bring forward rate-cut expectations for the Fed significantly. The U.S. Dollar Index will fall rapidly, U.S. Treasury yields will plunge, and large amounts of capital will flow into risk assets.

Core CPI vs. expectations: core CPI is above expectations:

2. Macro logic: inflation rears its head again. The market immediately delays the timing of the Fed’s rate cuts, and may even raise concerns about “pausing rate cuts and restarting rate hikes,” causing the U.S. dollar and U.S. Treasury yields to rebound sharply.

At the same time, also watch the 10:00 Fed hearing where Fed Chair Powell attends. Pay attention to the specifics of his remarks, as well as subsequent comments from other Fed officials. Also be mindful of market volatility driven by developments in peripheral regions.

Market volatility is relatively high—focus on risk control and defense. Taking profits within the range is enough to lock them in safely.