While risk-on sentiment dominated, crude oil remained elevated. Ongoing tensions in the Middle East have kept supply fears front and center, preventing oil from joining the broader rally and serving as a reminder that commodity-driven inflation risks have not fully receded.
Should oil prices sustain their upward trend, they could eventually feed into headline inflation readings and complicate the Fed’s policy calculus, potentially capping further gains in risk assets.
What to Watch
- Markets will now pivot to upcoming inflation reports and Fed communications for confirmation of the disinflation trend.
- Bitcoin and other rate-sensitive assets are likely to remain highly responsive to any deviation in price data or shifts in central bank rhetoric.
- If the disinflation trend continues, expectations of Fed rate cuts could increase, potentially driving further gains in bitcoin and gold.
The June PPI release has, for now, reinforced the view that inflation may be cooling sufficiently to allow the Fed to hold steady.
Sources: Source 1
