US Inflation Data Takes Center Stage as Gasoline Prices Weigh

The upcoming US inflation reading is set to be the focal point on Wednesday, as investors await the latest Consumer Price Index (CPI) for July. Analysts expect a small moderation in both headline and core CPI rates, with the headline rate anticipated to come in at 3.4% and the core rate moderating to 2.5%. This data will be closely watched, particularly in light of rising gasoline prices.

Kathleen Brooks from XTB believes that US inflation data has taken on greater significance as the Federal Reserve (Fed) becomes more opaque. She notes that a soft inflation print could lead to a rally in bonds, while a firm print would validate hawkish bets.

Ipek Ozkardeskaya from Swissquote emphasizes the importance of US data in shaping market expectations, especially with the Fed's guidance becoming less clear-cut. She warns that stronger-than-expected inflation would push yields higher and weigh on risk appetite, while benign numbers could temper hawkish bets without fully eliminating them.