Back-to-Back Soft US Inflation Prints

• US inflation slowed more than expected in June, with headline CPI falling 0.4% m/m and annual inflation easing to 3.5% from 4.2%. Core inflation also slowed to 2.6% y/y, reinforcing that underlying price pressures continue to moderate.
• The softer CPI print saw markets further unwind expectations of a near-term Fed hike. While Fed Chair Kevin Warsh maintained the inflation fight is not over, markets have largely ruled out a July move and turned their focus to upcoming data.
• US Treasury yields moved lower following the CPI release, with the 10-year yield easing from 4.63% to 4.57% as markets pared back tightening expectations. Traders now price around a 60% chance of a September Fed hike, down from 70% a day earlier.
• Geopolitics remained in focus after President Trump abandoned plans for a 20% toll on ships using the Strait of Hormuz, less than 24 hours after announcing it. Despite the reversal, fresh attacks on oil tankers kept Brent crude above US$85/bbl, leaving energy markets on alert.
• Attention now turns to China’s Q2 GDP, industrial production and retail sales, alongside US PPI. Together, the releases should provide a fresh read on global growth and inflation.