티미 AI
Today's CPI Decides Next Week's Fed Call
August CPI lands at 12:30 UTC. It is the last inflation reading the Fed sees before it meets on Wednesday. Consensus has headline holding at 3.4% year-on-year and up 0.4% on the month, pushed along by fuel and groceries. Core is expected to repeat July's 0.2% monthly gain, which would take the annual core rate down to 2.4%.
Markets are already 71% priced for a hike next week, up from 61% before Thursday's PPI. The 10-year yield sits at 4.97%, the highest since October 2023, and it got there partly on a Treasury buyback that came in well below what dealers wanted. A core print above 0.2% would hit a bond market with no cushion left.
A softer number buys Treasuries some relief. Not much, though. Wholesale energy costs are still climbing, and the energy side of headline inflation will not fade on one good month.
Oil Above $105 and Another ECB Hike
Saudi output fell to 6.24 million barrels a day in August, the lowest since 1990 and down roughly 1.9 million bpd. Gulf export routes are still blockaded and Houthi strikes have hit Saudi energy infrastructure, including the 400,000 bpd Jazan refinery. Brent is above $105 and WTI above $101, with Brent up almost 20% in a month. All of that goes straight into the fuel component that is supposed to lift today's headline number.
The ECB raised all three rates by 25 basis points yesterday, taking the deposit rate to 2.50%. That is its second hike since the war started. Everyone is tightening at once, and today's print decides whether that speeds up.
How It Trades
Core above 0.2% and Treasuries sell off hard and fast. The 10-year pushes to new multi-year highs, next week's hike goes from likely to done, and risk assets follow bonds down.
If core comes in at or below forecast, bonds catch a bid. Be careful reading much into it. The inflation impulse here is energy, PPI says upstream pressure has not eased, and any dip in yields could be shallow and brief.
The two-year is the one to watch. It moves first and it moves most on near-term Fed pricing. European bonds are already under pressure after the ECB and will likely take their cue from the US reaction. Crude is the wildcard. If it keeps running, the Fed's problem does not go away whatever core does today.
Risk Factors
- CPI prints move Treasuries violently in both directions within seconds, and the first reaction often reverses once traders read the detail.
- European traders face gap risk in US futures if the number lands outside the expected range before London cash is fully open.
- With the ECB having just hiked, a hot US print could set off a synchronised global bond sell-off rather than a Treasury-only move.
- A hike is already around 71% priced and yields sit at multi-year highs, so an in-line print could produce an outsized relief rally rather than a quiet session.
This article does not constitute financial advice. It is intended for informational purposes only. Trading financial instruments involves significant risk of loss and may not be suitable for all investors.
All figures cited are sourced exclusively from the verified market developments provided. Forecasts and consensus estimates are labelled as expectations and do not represent confirmed outcomes.
