BlockBeats News, July 15th. In June, the US CPI was significantly lower than market expectations, with the overall CPI falling to 3.5% year-on-year, and the core CPI also slowing to 2.6% year-on-year, experiencing its first negative month-over-month growth since 2020. The market immediately lowered its expectations of a year-end interest rate hike, leading to a synchronous rebound in the US stock market, gold, and the crypto market, with Bitcoin briefly approaching $65,000. If it can firmly hold above $64,000 in the future, the rebound momentum is expected to further continue.

However, this cooling of inflation is not due to broad-based demand weakness, but was driven by a large 5.7% monthly drop in energy prices and a sharp 9.7% plunge in gasoline prices, which rapidly cooled overall inflation. On the other hand, housing, food, and service prices continue to show positive growth, indicating that while core price pressures have improved somewhat, they have not completely disappeared. If the Middle East situation once again boosts energy prices, inflation may still receive support in the coming months, so the market will not completely rule out the possibility of inflation resurgence based solely on monthly data.

It is worth noting that Fed Chair Powell did not change his stance on inflation during his congressional testimony due to the cooling CPI. He still emphasized "zero tolerance" for sustained inflation and stated that interest rates and the balance sheet tool remain options, while initiating five research reforms including AI, productivity, balance sheet, and policy framework. This indicates that the Fed is downplaying forward guidance, preferring to adjust policies based on actual data rather than pre-announcing policy directions to the market, with the importance of each economic data point expected to further increase in the future.

On the other hand, tensions in the Middle East continue to escalate. The US has resumed naval blockade operations against Iran, with both the US and Iran continuing to make strong statements. The US is also pushing for the restart of the Iraq-Syria oil pipeline, aiming to reduce global dependence on the Strait of Hormuz. This indicates that energy supply is gradually moving towards a more diversified layout. However, until alternative transportation routes are fully established, the energy market will continue to maintain a higher risk premium, introducing a certain level of uncertainty to the pace of inflation improvement.

Additionally, the Japanese market also deserves continuous attention. The USD/JPY has returned to 162, prompting discussions on the accumulated risks of yen carry trades. If the Bank of Japan raises interest rates in the future, intervenes in the forex market, or if US economic data weakens leading to a decline in the US dollar, it may prompt a rapid unwinding of carry trades, further increasing short-term volatility in global tech stocks and high-risk assets.

Overall, the CPI this time brought about a restoration of market sentiment rather than a complete elimination of risks. Moving forward, the market will focus on three main themes: whether inflation can continue to improve against the backdrop of an energy price rebound, whether the Fed will continue to maintain a data-dependent policy stance, and whether there will be a structural change in the flow of funds in Japan. Against the backdrop of policy, geopolitics, and global liquidity still mutually influencing each other, the volatility of risk assets is expected to remain relatively high.