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- US June NFIB small business optimism index 97.4 vs 95.7 expected
- What is the distribution of forecasts for the US CPI?
- The bond market is one spot to keep an eye out for
- Long global semiconductors remains the most crowded trade on record as BofA notes ‘no one is short’
- Gold at risk of another selloff as a crucial US CPI report looms amid renewed US-Iran crisis
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- What are the main events for today?
- Germany wholesale prices drop further in June but remain elevated as a whole
- FX option expiries for 14 July 10am New York cut
- Oil prices extend run higher as US-Iran tensions intensify
- US inflation the main focus in the day ahead
It’s been a relatively calm session as the price action stayed mostly rangebound heading into the US CPI report.
Oil prices continued to edge higher, with WTI rising above the $80 level as escalating tensions between the US and Iran fuelled fears of further supply disruptions. Markets continue to price in heightened geopolitical risk premium amid concerns over the Strait of Hormuz.
Bank of America’s July Fund Manager Survey was ominous as the sentiment became very lopsided. The survey showed record 54% expecting ‘no landing’ and just 2% seeing a ‘hard landing’. Long global semiconductors remained the most crowded trade on record, with BofA noting that ‘no one’ is short. Moreover, 83% of investors were not expecting a Fed rate hike before November midterms. These were all very one-sided views.
The contrarian trades here would be short the Nasdaq on crowded semiconductors and tech positioning, long US 10y Treasuries on record ‘no landing’ view, long US dollar on low odds of Fed rate hikes before November and long oil on lower year-end price forecast.
The US NFIB Small Business Optimism Index rose to 97.4 in June, comfortably beating expectations of 95.7. The improvement reflected stronger business confidence following lower fuel prices earlier in the month, although inflation remained the top concern for small businesses, with firms continuing to report higher selling prices and persistent difficulties in finding qualified workers.
In the American session, all eyes will be on the US CPI report although we will also have Fed Chair Warsh testimony. Headline CPI Y/Y is expected at 3.8% vs 4.2% prior, while the M/M measure is seen at -0.1% vs 0.5% prior. The Core CPI Y/Y is expected at 2.8% vs 2.9% prior, while the M/M figure is seen at 0.2% vs 0.2% prior.
The only data point that will matter is the Core CPI M/M which is expected at 0.2%, so you can forget all the rest. Fed’s Williams said that he will consider rate hikes if monthly core inflation (using the PCE measure) runs above 0.2% in the second half of the year. Fed’s Waller, yesterday, made it clear that he won’t wait for such a long time and today’s report will be enough for him to vote for a rate hike in July in case the data beats forecasts. Waller has been a great leading indicator since 2021.
This article was written by flfeaa2662d774455a8d50fa77b791ed5f at investinglive.com.
