Hot things: CPI and Solana
CPI Still Hot
Despite oil prices falling and inventories growing, lagging CPI data came in hot this week. It was expected to be an eye-popping 8.8% but still managed to surprise to the upside. The CPI print of 9.1% was the highest in four decades as gas prices soared 11% month-over-month.
Due to the perceived lack of inflation relief, markets immediately reacted to the news, upping the consensus Fed Funds target for the next FOMC meeting by 25 BPS. At the time of writing, the futures market is pricing in a 100 BPS hike in two weeks.
The yield curve also promptly inverted, as inflation concerns are now compounded by recession fears. This was the second time this year that the yield curve inverted in the traditional sense and the third time since 2019. Interestingly the yield curve inversion in 2019 closely preceded a reversal of the last Fed tightening regime.
This might seem bad, but the day's events had a clear silver lining. Overall, risk assets did not experience the same gap down in prices that they were victims to following the CPI report in June. Following a pre-market sell-off, both the $QQQ and $BTC rallied back to finish the day of trading in the green.
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