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Why tonight’s inflation report could shake global markets to their core

Why tonight’s inflation report could shake global markets to their core

July Consumer Price Index (CPI) data is a critical indicator of inflationary trends that could shape monetary policy and asset prices worldwide. The muted global risk sentiment reflects a cautious stance among investors, driven by uncertainty surrounding the inflation report and its implications for Federal Reserve policy.

Meanwhile, President Donald Trump’s executive order extending the China tariff deadline by 90 days into early November has provided a temporary reprieve, lifting sentiment in Asian markets. However, Wall Street’s cautious retreat from near-record highs, coupled with developments in cryptocurrencies like Ethereum and Bitcoin, underscores the intricate interplay of macroeconomic data, trade policies, and speculative assets in shaping market dynamics.

The US July CPI report, due tonight, is a focal point for markets, as it will provide insight into whether inflationary pressures are intensifying or moderating. Economists project a year-over-year headline inflation increase of 2.8 per cent, up 10 basis points from June’s 2.7 per cent, with core CPI, which excludes volatile food and energy prices, expected to rise 0.3 per cent month-over-month and 3.0 per cent annually. These figures are critical because they could influence the Federal Reserve’s decision on interest rates at its September meeting.

A softer-than-expected CPI reading could bolster expectations for a 25-basis-point rate cut, signalling that the Fed views inflation as manageable and is prioritising economic growth amid signs of a slowing labour market. Conversely, a higher-than-expected figure could dampen hopes for immediate rate cuts, as persistent inflation driven by tariffs and supply chain pressures might force the Fed to maintain its current stance. This uncertainty has kept investors on edge, contributing to a cautious tone in global markets.

The recent executive order from President Trump extending the China tariff deadline by 90 days has introduced a layer of optimism, particularly in Asian equity markets. The decision, while light on specifics, signals a temporary de-escalation in US-China trade tensions, which have been a significant driver of market volatility in 2025.

Asian equity indices opened higher this morning, reflecting relief that the immediate threat of escalated tariffs has been deferred. This extension aligns with earlier trade agreements, such as the May 12 deal that paused additional tariffs and set US tariffs on Chinese imports at 30 per cent, while China lowered its tariffs on US goods to 10 per cent.

However, the fluid nature of trade policy under the Trump administration keeps markets wary. A social media post from the White House on May 30 suggested that China may have violated the agreement, raising the specter of renewed tariffs. Such unpredictability underscores the fragility of the current truce and its potential to disrupt global trade and inflation dynamics.

Wall Street’s reaction to these developments has been subdued, with major indices like the S&P 500, NASDAQ, and Dow Jones retreating slightly from near-record levels, declining by 0.3 per cent, 0.3 per cent, and 0.5 per cent, respectively. This pullback reflects investor caution ahead of the CPI data, as a higher-than-expected inflation reading could pressure risk assets, including equities and cryptocurrencies.

US treasury futures have shown limited volatility, with yields remaining rangebound, indicating that bond markets are also in a wait-and-see mode. The US Dollar Index, up 0.3 per cent, has benefited from this cautious sentiment, as investors seek safe-haven assets amid uncertainty. Gold, however, retreated 1.4 per cent to US$3,351 per ounce after Trump clarified that bullion imports would be exempt from tariffs, reducing its appeal as a hedge against trade-related inflation.

In the commodity markets, Brent crude oil edged up 0.1 per cent, consolidating at higher levels despite a lack of significant news flow. The oil market’s stability reflects a balance between demand concerns and supply dynamics, with OPEC+ reportedly considering a larger-than-expected production hike.

This development could cap upside potential for oil prices, particularly if trade tensions resurface and dampen global demand. The interplay between tariffs, inflation, and commodity prices remains a critical factor for investors, as higher input costs could further fuel inflationary pressures, complicating the Federal Reserve’s policy calculus.

The cryptocurrency market, meanwhile, has emerged as a bright spot amid the broader caution. Ethereum has outperformed Bitcoin in year-to-date gains, rising 29 per cent to US$4,311.58 compared to Bitcoin’s 28 per cent increase to US$120,020.83. Ethereum’s surge past the US$4,000 mark, a level not seen since December 2024, reflects growing institutional demand and inflows into US spot Ethereum exchange-traded funds (ETFs).

These funds have attracted US$5 billion in net inflows over the past month, with total assets under management reaching US$20 billion since their launch in July 2024. Digital asset treasury companies (DATs) are also stockpiling ETH, emulating the strategy pioneered by Bitcoin advocate Michael Saylor. This institutional buying has bolstered Ethereum’s price, despite a 0.9 per cent daily decline, and highlights the increasing integration of cryptocurrencies into mainstream finance.

Bitcoin, while slightly trailing Ethereum in year-to-date performance, has also seen significant gains, climbing above US$122,000 over the weekend. The total cryptocurrency market capitalisation has surged to US$4.1 trillion, reflecting renewed investor enthusiasm. The correlation between Bitcoin and US equity markets has strengthened since mid-July, suggesting that cryptocurrencies are increasingly viewed as risk assets sensitive to macroeconomic developments.

Options market activity underscores this dynamic, with Bitcoin options open interest at US$43 billion and Ethereum at US$13.9 billion, approaching record highs. Traders are positioning for volatility around the CPI release, with elevated open interest indicating both hedging against downside risks and bets on further upside momentum. Short-call covering in Bitcoin options suggests reduced bearish sentiment, but implied volatility is expected to remain high until the CPI data provides clarity.

From my perspective, the current market environment reflects a delicate balance between optimism and caution. The extension of the China tariff deadline offers a reprieve, but the lack of clarity on trade policy keeps investors on edge. The CPI report will be a pivotal moment, as it could either reinforce expectations for a dovish Federal Reserve or signal persistent inflationary pressures that delay rate cuts.

The resilience of cryptocurrencies like Ethereum and Bitcoin, driven by institutional adoption and ETF inflows, highlights their growing role as alternative assets in a volatile macroeconomic landscape. However, their correlation with equities suggests that a negative surprise in the CPI data could trigger a broader sell-off in risk assets.

The Federal Reserve faces a challenging path. Two Fed governors, Michelle Bowman and Christopher Waller, dissented in the last meeting, advocating for rate cuts due to signs of a slowing labor market and their belief that tariff-driven inflation may be transitory.

However, Fed Chair Jerome Powell has emphasised a data-dependent approach, and a higher-than-expected CPI reading could strengthen the case for holding rates steady. The labor market, while still robust, shows signs of softening, with recent revisions slashing job growth figures for May and June to 19,000 and 14,000, respectively. These figures, the lowest two-month job growth since April 2021, add pressure on the Fed to balance its dual mandate of price stability and maximum employment.

Asian markets’ positive response to the tariff deadline extension underscores the global sensitivity to US trade policy. However, the risk of retaliation from trading partners, such as the EU’s potential €95 billion countermeasures, looms large.

Tariffs have already driven price increases in categories like furniture, auto parts, and electronics, contributing to inflation expectations of 4.4 per cent in the coming year, according to the University of Michigan’s consumer sentiment survey. Despite these concerns, consumer sentiment improved in July to 61.8, reflecting resilience in the face of tariff threats and robust retail sales data.

In conclusion, the US CPI report serves as a critical catalyst. The interplay of trade policy, inflation, and monetary policy will shape market sentiment in the coming weeks. Cryptocurrencies, particularly Ethereum, are carving out a significant role in this environment, driven by institutional demand and speculative interest.

However, the risks of higher inflation and renewed trade tensions could disrupt the current rally in risk assets. Investors should remain vigilant, balancing opportunities in equities and digital assets with the need to hedge against potential volatility. The next few days will be crucial in determining whether the current cautious optimism gives way to renewed confidence or a retreat into risk-off sentiment.

 

Source: https://e27.co/why-tonights-inflation-report-could-shake-global-markets-to-their-core-20250812/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author. The latest book is Web4: The Age of Autonomous Intelligence.

www.anndy.com
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The inflation ripple effect: From Wall Street to cryptocurrency to Washington

The inflation ripple effect: From Wall Street to cryptocurrency to Washington

The story begins with the latest inflation report, a document that has sent shockwaves through financial markets worldwide. In June, the US headline Consumer Price Index (CPI) climbed by 2.7 per cent year-over-year, surpassing economists’ estimates of 2.6 per cent.

Core inflation, which strips out the often erratic swings in food and energy prices, held steady at 2.9 per cent year-over-year, aligning with expectations. At first glance, these numbers might seem like mere statistics, but they carry profound weight.

Inflation is the heartbeat of an economy, and the Federal Reserve monitors it closely to calibrate interest rates. When prices rise too quickly, the Fed might tighten policy to cool things down; when they lag, it might ease rates to spur growth.

This time, the higher-than-anticipated headline CPI signals that tariff-related price pressures are starting to bite, pushing out hopes for rate cuts this year.

This development is a double-edged sword. On one hand, it reflects the real-world impact of trade policies, like tariffs, which ripple through supply chains and hit consumers in the wallet.

On the other hand, it complicates the Fed’s delicate balancing act. With inflation stubbornly above the Fed’s two per cent target, the central bank faces pressure to keep rates elevated, a stance that could dampen economic momentum just as growth shows signs of faltering.

Analysts I’ve followed suggest that earlier optimism for rate cuts this year is fading rapidly, replaced by a resigned expectation that the Fed will hold firm to prevent inflation from deepening. This shift is significant because it affects everything from mortgage rates to corporate investment, shaping the economic landscape for months to come.

Market reactions: A tale of divergence

The markets didn’t take this news lying down. In the US, the reaction was a study in contrasts. The S&P 500 dipped by 0.4 per cent, and the Dow Jones Industrial Average took a steeper hit, falling 1.0 per cent. Yet the NASDAQ, defying the gloom, edged up by 0.2 per cent, buoyed by reports of resumed chip sales to China.

This split fascinates me. It shows how different sectors digest the same data differently. The tech-heavy NASDAQ likely received a boost from the chip news, a lifeline for semiconductor firms in a tense trade environment. Meanwhile, the broader S&P 500 and Dow, with their mix of industries, seemed more rattled by inflation’s implications for interest rates and costs.

The bond market echoed this unease. US Treasuries stumbled, with the 10-year yield rising 4.8 basis points to 4.481 per cent and the two-year yield climbing 4.0 basis points to 3.940 per cent. Higher yields signal that investors are seeking a higher return for holding government debt, a classic response to inflation fears or expectations of tighter monetary policy.

I see this as a sign of markets bracing for a Fed that’s less dovish than hoped, a shift that could ripple into borrowing costs everywhere.

Currency markets told a similar story. The US Dollar Index, which tracks the dollar against major currencies, surged 0.6 per cent to 98.62, its highest level in three years. This strength makes sense: if the Fed holds rates steady while others cut, the dollar becomes a magnet for capital.

In contrast, the Japanese Yen slumped 0.8 per cent to 148.88, its weakest level since early April, as it was dragged down by a sell-off in Japan’s bond market. To me, this divergence highlights the interconnected yet fragmented nature of global markets, which each react to local cues within a shared economic web.

Across the Pacific, Asia offered a mixed bag. China’s real GDP growth remained steady at 5.2 per cent year-over-year, a respectable figure; however, nominal GDP growth declined to 3.0 per cent, the slowest pace since 2023. June data painted a grimmer picture: retail sales slowed, fixed asset investment weakened, and home prices and property investment took a deeper dive.

Yet Hong Kong’s tech stocks shone, driving regional gains even as Asian equity indices wavered in early trading. I find this resilience in tech intriguing, a glimmer of optimism amid China’s broader economic clouds. It suggests that investors still see value in innovation, even when domestic demand falters.

Then there’s the cryptocurrency market, which has taken a bruising. US-listed crypto stocks like Canaan Inc., down over 10 per cent, Circle, off nearly five per cent, and Riot Platforms and CleanSpark, each shedding more than three per cent, felt the heat.

Big names like Coinbase, Robinhood, and MicroStrategy weren’t spared either. This sell-off, sparked by the CPI data and the Fed’s steady-rate stance, stripped away a hoped-for boost for Bitcoin.

I’ve always viewed crypto as a wild card: touted as an inflation hedge, yet hypersensitive to interest rate shifts. Here, higher rates made safer assets, such as bonds, more appealing, dimming the allure of crypto. It’s a reminder of how volatile this space remains, tethered to macroeconomic tides.

Political drama: The GENIUS Act’s stumble

While markets churned, Washington delivered its drama. The US House of Representatives hit a wall when a procedural motion to advance the GENIUS Act, alongside the CLARITY Act and the Anti-CBDC Act, failed with 196 votes in favour and 222 against. Dubbed “Crypto Week,” this was intended to be a landmark moment for crypto regulation, but it ultimately ended in a stalemate.

The GENIUS Act, short for “Generating Efficient Networks for Innovation and Utility in Stablecoins,” aims to clarify the rules for stablecoins, digital currencies tied to assets such as the US dollar. The CLARITY Act aims to clarify the legal standing of crypto, while the Anti-CBDC Act opposes the development of a central bank digital currency (CBDC). These bills could shape America’s crypto future, either fostering innovation or reining it in.

The snag came from within the Republican ranks. Some GOP lawmakers balked at the GENIUS Act’s lack of a full CBDC ban, fearing it left room for a digital dollar they see as a privacy nightmare. Marjorie Taylor Greene voiced this worry, arguing the bill indirectly props up a CBDC framework, a sentiment echoed by others in her party.

This internal rift derailed the vote, despite President Donald Trump’s plea to support the bill and solidify US crypto leadership. His words fell flat, exposing a GOP at odds with itself.

Democrats, led by Maxine Waters, pounced. They mocked Republican disarray and doubled down on their opposition to the GENIUS Act, citing insufficient safeguards and risks of unchecked financial experimentation. Their earlier “Anti-Crypto Corruption Week” had already telegraphed this stance.

To me, this clash is more than partisan theatre. It’s a microcosm of a bigger struggle: how to regulate a technology that’s outpacing policy. I lean toward clarity in regulation, believing it could unlock crypto’s potential while curbing its excesses. But I get the skepticism, too, the fear of opening Pandora’s box without knowing what’s inside.

My take

Economically, the inflation spike and the Fed’s response signal more challenging times ahead. I worry about the squeeze on households and businesses if rates remain high, yet I see the logic in taming inflation before it spirals out of control.

Markets, with their choppy reactions, reflect this uncertainty, a tug-of-war between fear and opportunity. In Asia, China’s slowdown hints at deeper structural woes, though tech’s tenacity offers hope.

Politically, the GENIUS Act’s flop is a missed chance, but it’s not the end. I think the US risks falling behind if it can’t sort out crypto rules soon, especially as other nations race ahead. The GOP’s split and Democrats’ resistance highlight how ideology and caution can stall progress. I’d argue for a middle path: regulate enough to protect, but not so much as to stifle. Trump’s vision of crypto dominance is bold, but it needs a united front to work.

Looking forward, the Fed’s next moves and Congress’s retry on crypto will be pivotal. Markets will stay jittery, and I suspect volatility is our new normal.

For now, we’re left with questions: Can the US balance economic stability and innovation? Will political will align with technological reality? I’ll keep digging for answers, but one thing’s clear: this week’s turbulence is just the start.

 

Source: https://e27.co/the-inflation-ripple-effect-from-wall-street-to-cryptocurrency-to-washington-20250716/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author. The latest book is Web4: The Age of Autonomous Intelligence.

www.anndy.com
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Inflation, trade, and tariffs: A mixed macro picture

Inflation, trade, and tariffs: A mixed macro picture

assets and the anticipation surrounding key macro events, numerous factors are driving market movements across equities, volatility, digital assets, fixed income, currencies, and commodities.

I’ll break down these drivers and catalysts, weaving in specific data and headlines to provide a thorough understanding of the current landscape.

Equities: Trade tensions and regional resilience

The equities market is experiencing a tug-of-war between geopolitical uncertainty and regional strength. Donald Trump’s confirmation of a 50 per cent tariff on copper imports, a figure double the anticipated 25 per cent, has sent ripples through global markets.

This bold move, aimed at protecting domestic industries, is poised to increase costs for US businesses reliant on copper, such as those in construction, electronics, and renewable energy. The tariff’s immediate effect has been to heighten uncertainty, with investors bracing for potential retaliatory actions from trading partners.

Yet, despite this turbulence, equities in the European Union are holding strong. The STOXX Europe 600 Index has climbed over two per cent in the past week, fuelled by robust economic data and optimism about the region’s recovery. Sectors like technology and industrials are leading the charge, suggesting that European markets are, for now, shrugging off the broader trade war concerns.

Meanwhile, UK exporters are reaping the benefits of a weaker pound, which has depreciated by roughly 1.5 per cent against the dollar recently. This currency movement has made British goods more competitive internationally, boosting companies like Rolls-Royce and AstraZeneca, which have reported increased export orders. The FTSE 100 has seen modest gains as a result, though the shadow of escalating trade tensions looms large.

In my view, the resilience of EU and UK equities is impressive, but it’s tempered by the risk that Trump’s tariff policies could spark a broader trade conflict, potentially derailing these gains. Investors should keep a close eye on how these dynamics unfold, as the balance between regional strength and global uncertainty remains delicate.

Volatility: A calm before the storm?

Turning to volatility, the VIX, often dubbed the market’s “fear gauge,” has eased to 16.8, down from recent highs, signalling a period of relative calm. This decline suggests that investors are less worried about immediate market swings, possibly reassured by positive economic signals or the resolution of some geopolitical tensions.

The S&P 500’s expected move of ±0.44 per cent further supports this picture of stability, indicating a tight trading range for the index. Additionally, the flat volatility curve, where short-term and long-term expectations align, hints at a lack of imminent stress. Historically, a VIX below 20 is considered a sign of market confidence, and at 16.8, we’re in that territory.

However, I’m skeptical that this tranquility will last. A flat volatility curve can be a double-edged sword; while it reflects calm now, it’s often a precursor to sharp corrections when underlying risks such as Trump’s trade policies or upcoming macroeconomic events resurface.

My take is that this lull is a breather rather than a new normal. Investors might be lulled into complacency, but the potential for sudden disruptions remains high. Keeping an eye on catalysts like the FOMC minutes or unexpected tariff escalations will be critical in the days ahead.

Digital assets: Stability and divergence

The digital asset space presents a fascinating contrast to traditional markets, striking a balance between stability and selective growth. Bitcoin has held steady around US$109,000, a sign of its maturing role as a store of value amid broader market uncertainty. This resilience is bolstered by continued inflows into Bitcoin ETFs like IBIT, which have drawn institutional interest seeking exposure to cryptocurrencies.

Meanwhile, Ethereum has posted gains, trading at approximately US$2,557, likely driven by developments in decentralised finance (DeFi) and anticipation of network upgrades. However, not all digital assets are thriving equally, ETHA, an Ethereum-based ETF, has dipped, highlighting the nuanced dynamics within this sector.

Beyond the price action, there’s notable activity in the crypto-treasury space. Binance co-founder Changpeng Zhao’s family office, YZi Labs, is backing The BNB Treasury Company, a new firm offering exposure to BNB with plans to list on a major US exchange. With BNB trading at US$662.43, this move highlights the growing convergence of cryptocurrency and traditional finance.

Similarly, Donald Trump Jr.’s investment in Thumzup Media Corp, a social media marketing firm adopting Bitcoin as a treasury asset at US$111,178 per coin, reflects a broader trend of corporate Bitcoin adoption. Thumzup’s stock, trading at US$9.50 per share with Trump Jr. holding 350,000 shares valued at nearly US$3.3 million, illustrates how even non-tech firms are embracing crypto strategies.

Analysts also suggest Bitcoin may face a short-term dip below US$107,000 before its next rally, potentially hitting a Fair Value Gap between US$106,500 and US$106,200. This correction could be a strategic play by “smart money” to grab liquidity before pushing prices to new highs.

Fixed income: Yields on the rise

In the fixed income market, US Treasury yields are climbing ahead of the pivotal 10-year auction, with the benchmark 10-year yield reaching approximately 4.35 per cent. This uptick reflects investor expectations of tighter monetary policy from the Federal Reserve, as well as anticipation of higher interest rates to combat lingering inflation pressures.

Rising yields have broad implications: they make bonds more attractive compared to equities, potentially triggering a shift in investor allocations, and they increase borrowing costs, which could slow economic growth. The upcoming US$39 billion 10-year Notes auction at 1700 GMT will be a litmus test; strong demand could signal confidence in the US economy, while weak demand might raise red flags about yield sustainability.

The rise in yields is a double-edged sword. It reflects a healthy adjustment to economic realities, but it also risks stifling growth if rates rise too quickly. The auction’s outcome will be a key indicator of market sentiment, and I’d wager that investors are bracing for a bumpy ride as they balance yield opportunities against broader uncertainties.

Currencies: Dollar’s modest strength

The US dollar is enjoying modest gains against its G10 peers, buoyed by rising Treasury yields and its safe-haven status amid trade war jitters. It’s particularly strong against the Japanese yen and the euro, where dovish central bank policies have weakened local currencies.

However, these gains are restrained by concerns over the economic fallout from Trump’s tariffs, which could dampen US growth and, in turn, the dollar’s appeal. The pound’s 1.5 per cent drop, as noted earlier, is another piece of this puzzle, driven by export dynamics rather than broad dollar strength.

I see the dollar’s current position as a reflection of short-term flight-to-safety flows rather than a sustained bullish trend. If trade tensions escalate, the dollar could face headwinds, but for now, it’s holding its ground. Currency markets are notoriously sensitive to macro shifts, so the FOMC minutes and auction results could quickly alter this trajectory.

Commodities: Copper in the spotlight

Commodities are feeling the heat of Trump’s trade policies, with HG copper surging to a near 30 per cent premium over London prices following the 50 per cent tariff announcement.

Copper, a critical input for industries like electronics and construction, is now at the centre of supply chain concerns, with US manufacturers warning of price hikes and disruptions. This premium reflects anticipated shortages and higher costs, though global supply chains may eventually adapt to blunt the tariff’s impact.

In my view, copper’s surge is a classic case of policy-driven volatility. While the short-term effects are clear, the long-term picture depends on how producers and consumers adjust. For now, it’s a stark reminder of how quickly commodities can become geopolitical pawns.

Macro events and data: What’s next?

Two major macro events loom large: the US 10-year Notes auction and the release of the FOMC minutes from the June meeting at 1800 GMT. The auction will gauge investor appetite for US debt, while the minutes will offer clues about the Fed’s stance on rates and inflation, critical drivers of market expectations.

Elsewhere, macro data paints a mixed picture. US consumer inflation expectations for June 2025 have dropped to three per cent, a sign of cooling pressures, but commodity price expectations remain elevated for gas (4.2 per cent), medical care (9.3 per cent), college education (9.1 per cent), and rent (9.1 per cent). Taiwan’s trade surplus, meanwhile, jumped to US$12.07 billion, driven by exports of tech products, though exports to Europe declined.

Headlines amplify the noise: Trump’s tariff threats extend beyond copper to pharmaceuticals (up to 200 per cent, delayed 12-18 months) and India (an extra 10 per cent for BRICS ties), with no extensions on country-specific levies due in August. He’s also mulling a new tariff on the EU over tech disputes. These moves keep markets on edge, and I’d argue they’re a wildcard that could overshadow even the Fed’s signals if they materialise.

My take: Navigating the uncertainty

In wrapping up, the current market environment is a complex tapestry of opportunity and risk. Trump’s trade policies are the loudest drumbeat, shaking up commodities and equities while leaving volatility deceptively calm.

Digital assets are carving out a niche of stability, fixed income is adjusting to policy shifts, and currencies are caught in the crosscurrents. The upcoming macro events will either clarify or complicate this picture, but for now, caution seems warranted.

The markets’ resilience strikes me: EU equities, UK exporters, and Bitcoin are holding firm, but I can’t shake the feeling that we’re one tariff tweet away from a sharper correction. Investors would do well to remain nimble, closely monitor the data, and be prepared for surprises in this unpredictable landscape.

 

 

Source: https://e27.co/inflation-trade-and-tariffs-a-mixed-macro-picture-20250710/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author. The latest book is Web4: The Age of Autonomous Intelligence.

www.anndy.com
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