US CPI Surges Beyond Expectations, Risk Assets Rise on Structural Inflation Hope

The latest US CPI report shows an annual rate of 2.7%, which exceeds expectations, while the core CPI stands at 0.2%, falling short of anticipated figures. The decline in the core CPI indicates a reduction in structural inflation, signaling to the market that the Fed might continue with rate cuts. Consequently, capital is flowing into risk assets like technology stocks and cryptocurrencies. Meanwhile, the dollar's rise is attributed to the overall higher CPI figure, prompting the market to expect that the Fed will remain cautious and potentially lower interest rates in September. Gold's price drops as inflation fears diminish, leading capital to seek higher returns elsewhere. In my view, trading based solely on these data points is misguided; understanding their context and narrative is essential. The current environment favors risk assets over safe havens, aligning with a risk-on sentiment.