#USPPIComesInBelowExpectations The US Producer Price Index (PPI) data came in significantly below expectations, and this, coupled with the cooling in June's CPI data, strongly supports the disinflation narrative.

June's final demand PPI fell 0.3% month-on-month, marking its first decline since August 2025, exceeding market expectations of an increase. On an annual basis, the figure dropped to 5.5%, down from a downward revision of 6.0% the previous month. Core PPI delivered an even more striking surprise, falling 4.7% year-on-year, exceeding expectations of a 5.2% increase. Much of this decline came from energy prices, with gasoline prices alone falling 12%, accounting for two-thirds of the overall drop in commodity prices.

This data, along with the June CPI data released the previous day, forms a complete picture. CPI also fell by 0.4% monthly, the largest monthly drop since April 2020, and annual inflation dropped to 3.5%, exceeding expectations of 3.8%. The fact that these two inflation indicators came in consecutively and significantly colder created a real shift in market expectations; the probability of a Fed rate hike in July fell from 40% to 16%, and the probability of a September hike fell from 74% to 60%.

The impact of this on the markets was immediate and widespread. The dollar index fell to the 100.51-100.70 range, bond yields dropped, stocks and crypto assets began to recover, Bitcoin rose from around $62,000 to the $64,000-$65,000 range, and Ethereum climbed above $1,900. This clearly shows how the disinflation theme has become a direct support factor for both traditional and crypto risk assets.

But there is a real caveat here, and it is directly related to recent developments. These figures are from June, meaning they don't yet fully reflect the impact of the recent wave of attacks on Iran and the sharp rise in oil prices. WTI approached $80 this week, and Brent neared $85, due to the renewed US naval blockade and ongoing conflict. This rise in energy prices, once reflected in the July data, could partially reverse today's positive picture, a risk already being voiced by some analysts.

For those following Fed policy and risk assets through Gate, the key point is this: these two consecutive cold data points are real and market-moving, but their sustainability largely depends on how high oil prices remain in the coming weeks. When the July inflation data is released, the extent to which this oil shock has impacted prices will be the most critical indicator determining the Fed's stance at its July 28-29 meeting and, consequently, the trajectory of risk assets.

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