Something for Your Espresso: Retail Sales Deciding the Direction for the Risk-On Rally

Good Morning from Copenhagen.
Gas prices emerged as the main culprit behind headline inflation, contributing 14 bps in December compared to under 2 bps in November. This spurred a significant relief rally across risk assets, yet the USD lagged, underperforming relative to the sharp move higher in bond yields.
Chart 1.a: CPI coming in soft on the core side
Yesterday’s softer-than-expected core CPI print fueled a relief rally in risk assets, though mixed signals from CARTS and diffusion data suggest the inflation narrative remains uncertain. Today’s Retail Sales report will be crucial in determining market direction, with strong consumption trends pointing to upside risks, but conflicting indicators adding a layer of caution.
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