A soft US jobs report cut September Fed hike odds from 67% to 44%, leaving markets buoyant but making Wednesday's CPI print the decisive risk as analysts expect 0.1% headline and 0.2% core inflation and JPMorgan forecasts core near 0.22%. Oil rose (Brent $84.32, US crude $78.74) on Strait of Hormuz uncertainty, increasing inflation upside that could revive rate‑hike bets and pressure crypto and Bitcoin, affecting DeFi, DEX and CEX activity and token performance. The S&P 500 hit a record with earnings per share up about 30% year‑on‑year, but the rally and crypto adoption remain conditional on the CPI outcome.

Bearish

Predictions Markets

See what traders are focused on

View analytics →

In Brief

September Fed hike odds fell from 67% to 44% after a soft US jobs report
Oil crept higher as the Strait of Hormuz deal stalled, raising inflation risk
Wednesday's CPI print will decide whether this week's rally holds or unravels

Asian stocks edged higher Monday and the probability of a September US rate hike dropped sharply, giving global markets room to extend last week’s record run. The calm has one clear expiry date: Wednesday’s inflation report.

Japan’s Nikkei and South Korea’s KOSPI added marginally as the new week began. The MSCI Asia-Pacific index outside Japan also edged up, all tracking Wall Street’s Friday close, where the S&P 500 notched a fresh record high.

The CPI Report That Could Reset the Rate Trade

The shift in rate expectations drove most of last week’s action. Futures markets now price around a 44% chance the Federal Reserve raises borrowing costs at its September meeting, down from 67% a week ago. A soft US jobs report triggered the move, pushing Treasury yields lower and lifting risk appetite globally.

Wednesday’s consumer price index (CPI) report, covering July prices, is the next checkpoint. Analysts expect a 0.1% rise in headline inflation and 0.2% for core, which strips out food and energy.

JPMorgan chief US economist Michael Feroli told clients: “Our forecast for core CPI of 0.22% is probably not quite firm enough to prompt a hike from the Fed at the September meeting, though repeated prints closer to 0.3% could do it.” He flagged a potential rebound in core goods prices as a specific watch item.

The stakes around this week’s CPI are familiar for crypto markets; rising rate hike expectations tend to suppress risk appetite and weigh on Bitcoin and digital assets.

Hike odds had briefly touched 66% earlier this year before softening on cooler data. Wednesday could move that number fast in either direction.

Oil Is the Inflation Wildcard

The complication is oil. Brent crude rose 0.9% to $84.32 a barrel Monday and US crude added 0.7% to $78.74. The driver: Iran said on Sunday that a deal with Oman defining new shipping lanes through the Strait of Hormuz is in “final stages,” but reiterated the waterway would only reopen once the US met separate conditions.

Shipping through the Strait, one of the world’s critical oil chokepoints, remains minimal.

After a fall, oil is back on the rise this week. Image Source: Trading Economics

Sustained oil pressure feeds directly into headline inflation. A hot CPI print Wednesday would reignite rate hike speculation and put the current rally under immediate pressure.

The dollar dropped broadly on easing rate fears, with the euro near a seven-week high at $1.1557 and gold holding at $4,342 an ounce after climbing more than 7% last week.

With nearly 90% of S&P 500 results in, Bank of America data shows earnings per share up 30% year-on-year, with AI stocks posting median growth of 28% against 12% for the rest of the index. The backdrop is strong. Wednesday decides whether it holds.

Read the article at BeInCrypto