Market Prep: Inflation Expectations Surge Ahead Of CPI

Market Flow Analsis

Hello Traders,

WTI crude exploded toward $120 in the Asian session, triggered by a 'double whammy' of supply hits: Saudi Arabia slashing production following US-Israeli strikes on Iranian oil sites.

The big question now is whether the Fed will still cut rates like they promised. With inflation swaps already hitting 3% for the next year and a weak jobs report showing the economy is slowing, we are officially in the Danger Zone.

Data expected to be released on Wednesday, despite the PPI being way above consensus. the market is seeing a mild increase on the headline but they key data will be core. (source investing.com)

FINANCIAL WORRY

The market is terrified we’re repeating 2007—stuck in a stagflation trap where prices are yet expected to keep rising on fuel supply shock while the job market crumbles amid liquidity issues in the financial system.

The persistent underperformance of the financial sector relative to the broader market remains a key pillar of our thesis of complacency. This relative weakness confirms that the internal plumbing of the market is under stress, reinforcing our decision to maintain a defensive posture and avoid chasing short-term rallies.

XLF 0.00%↑ now down over 10% from the highs.

POSITIONING AHEAD OF CPI