A strange detail appeared after the market rose for one hour

—What really determines the direction of gold, US stocks, and the US dollar is no longer June inflation, but July oil prices.

The global markets’ moves on Wednesday were largely a repeat of Tuesday:

- The US Dollar Index fell for a second straight trading day, with the drop nearly matching the previous day’s decline;

- Gold, US Treasury bonds, and US stocks are still up slightly;

- Oil prices have risen for three straight trading days, with US crude oil breaking above $80.

First, the US June PPI released last night again came as a surprise—unexpectedly lower, with a month-over-month decline of 0.3% (versus the market forecast of no change), and the year-over-year growth rate slowing to 5.5%. After the data was released, the market came up with the “US inflation has peaked” narrative, and the probability of a rate hike in July fell from around 50% last week to about 10%. However, such a major positive should have triggered a big rally, but gold and US stocks only rose slightly—especially gold, which closed up by less than $10.

Gold’s performance is worth noting and is quite representative:

On Tuesday, after the CPI was released, it kept rising for three hours, then gave back part of the gains;

On Wednesday, after the PPI was released, it rose for just one hour, then kept falling for four straight hours.

The magnitude of the gains doesn’t match the strength of the positive news, suggesting the market is no longer only trading June data, but has started reevaluating new variables that may emerge in July.

The most reasonable explanation is that—these good messages seem to be a bit outdated.

On one hand, this is June data; by mid-July, the Middle East conflict has escalated again, and oil prices have surged again this week;

On the other hand, last night, Waller continued to stress that “these inflation data are not a perfect measurement,” and “there is zero tolerance for persistently high inflation.”

Second, at the start of this week, the three indicators we were watching all broke through key levels, but the directions were not consistent. The US Dollar Index fell below the 101 level, the yield on 10-year US Treasuries fell below 4.60%, while US crude oil “broke higher” and topped $80. The bond market (10-year US Treasuries) and the FX market (the US dollar) celebrated “inflation continuing to cool,” but the commodities market (crude oil) was warning that “inflation could flare back up”—a breakout that is “not sustainable to coexist for long.”

What we are seeing is the market’s struggle between “enjoying the comfort of the present (June data)” and “staying alert to the risks of the future (July geopolitics and oil prices).”

Risk warning: This article analyzes only based on publicly available information and market data, for information exchange purposes only, and does not constitute any investment advice or profit promises. Financial markets involve risks, and investment decisions need to be made independently based on one’s own circumstances.