We already addressed the US CPI report in our “Week at a Glance”. 

Tomorrow’s US CPI report is the make-or-break moment we’ve been waiting for. To keep the risk asset party alive, we need a soft outcome, and it looks like we might just get it. 

The balance of risks for headline inflation leans towards the soft side, with retail energy prices dropping through June and food inflation trends remaining tame. We’re betting on a close call between 0% and 0.1% MoM, but we’re leaning towards 0%, which would be a soft surprise. On the core inflation front, we’re particularly watching car insurance and shelter. Disinflation in these areas is key for potential Fed cuts. While another drop in car insurance isn’t expected, our indicators suggest continued YoY softening. 

We anticipate core inflation around 0.2% MoM, and an out-of-consensus print would surprise us. 

Bottom line: a soft inflation report is what we need to keep the good times rolling. Fingers crossed!