DXY is back!
AUD is not.
Lead boots plod on.
Gold bashed.
Metals too.
Big bear intact.
EM shaky.
Junk fine.
The curve steepened.
Stocks sold.
At issue is the US CPI tomorrow. Goldman.
Our analysis implies that tariff effects have boosted the core PCE price level by0.20% so far.
We expect another 0.16% impact in July, followed by an additional0.5% from August through December.
This would leave core PCE inflation at 3.2% year-over-year in December, assuming that the underlying inflation trend net of tariff effects is 2.4%
The mix will matter. Rising goods inflation by itself will probably be OK for markets as they expect the Fed to “look through it”.
But if there is any hint of creeping into services via wages, then look out.
I am not so sanguine. PCE at 3.2% will not comfort the Fed.
