Friday’s labor report changed the macro setup for the week ahead. U.S. nonfarm payrolls unexpectedly fell by 23,000 in July, while May and June employment were revised down by a combined 103,
Friday’s labor report changed the macro setup for the week ahead. U.S. nonfarm payrolls unexpectedly fell by 23,000 in July, while May and June employment were revised down by a combined 103,000 jobs. Futures responded by cutting the implied probability of a Federal Reserve hike in September to about 44%.
That puts this week’s inflation data at the center of the rate debate, with July CPI due Wednesday and PPI following Thursday but
the economic calendar is not the only risk.
U.S. CPI Release Headline ease forecast to 3.4% Wed, Aug 12 U.S. PPI Release Wholesale supply chain test Thu, Aug 13 Hormuz & Oil Watch Oman shipping lane talks OngoingThe U.S. Bureau of Labor Statistics will release July’s Consumer Price Index at 8:30 a.m. ET on Wednesday, August 12.
Economists polled by Reuters expect headline inflation to ease to 3.4% year over year from 3.5% in June, while core CPI is forecast at 2.5%.
With only a modest decline expected, the market reaction may depend less on the headline number itself than on how far it lands from consensus.
A downside surprise would strengthen the case for leaving rates unchanged after July’s weak employment report. Treasury yields and the dollar would likely be the first markets to react, with lower expectations for additional tightening generally creating a better backdrop for Bitcoin and other risk assets.
A hotter CPI could reverse that move quickly. Three of the Fed’s 12 policymakers favored raising rates at the July meeting, showing that support for tighter policy has not disappeared. If inflation proves more persistent than expected, the market could once again put a September hike above a 50% probability.
Morningstar Wealth strategist Dominic Pappalardo has argued that continued cooling in inflation may be enough to prevent another Fed hike this year, while an above-forecast CPI reading would likely put pressure on risk assets.
Citi takes a more dovish position, forecasting a cut as the Fed’s next move, potentially in October.
BofA Global Research had been at the opposite end of the spectrum. Before Friday’s labor report weakened the case for further tightening, BofA expected three quarter-point increases in 2026, beginning in September.
Wednesday’s CPI will show how much of that hawkish case remains intact.
The Producer Price Index follows at 8:30 a.m. ET on Thursday, August 13.
Producer inflation remains elevated despite some recent monthly relief. Final-demand prices fell 0.3% in June, according to the Bureau of Labor Statistics, but were still 5.5% higher than a year earlier.
PPI will provide a second look at inflation pressure further up the supply chain, although higher producer costs do not pass directly or immediately into consumer prices.
Businesses can absorb some increases through lower margins, renegotiate contracts or delay price changes. That means one strong PPI reading would not automatically imply another rise in CPI.
The more important question is whether Thursday’s report supports or undermines Wednesday’s signal. If both CPI and PPI cool, the case for another near-term hike would weaken further. Persistent wholesale inflation, however, would make any improvement in CPI less convincing.
PPI is therefore more likely to confirm or challenge Wednesday’s CPI signal than replace it as the week’s main catalyst.
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Crypto Can Move Without CLARITY – Can America Keep Up?Developments around the Strait of Hormuz carry a different type of risk because energy markets can reprice future inflation long before that pressure appears in official data.
Iran said on August 9 that an agreement with Oman defining new shipping lanes through the strait was in its “final stages.” Tehran also made clear that the agreement alone would not reopen the waterway, which remains dependent on additional conditions being met by the United States.
Iran and the U.S. are not currently holding open direct negotiations, with messages instead passing through intermediaries.
Any credible path toward restoring normal traffic in the Strait of Hormuz could remove part of the geopolitical premium embedded in crude prices.
Without that progress, crude would remain exposed to the risk of another supply-driven move higher. Rising oil prices can lift inflation expectations and bond yields before the effect appears in CPI, tightening financial conditions even without an immediate change in Fed policy.
Citi raised its third-quarter Brent forecast on August 7 to $80 a barrel from $75 because negotiations were taking longer than expected. Goldman Sachs expects Brent to remain around $80 to $90 until either a confirmed agreement emerges or the conflict escalates materially.
Energy prices also give Washington an economic reason to push for a reopening.
A Jerusalem Post report citing the Wall Street Journal said President Donald Trump has privately considered ending the conflict without securing a new nuclear agreement if Iran’s nuclear capabilities remain contained and normal shipping through Hormuz resumes.
That does not make lower oil prices Trump’s stated reason for pursuing a deal, but the economic incentive is clear. A prolonged disruption would risk another rise in energy costs just as the Fed is deciding whether inflation still warrants tighter policy.
For crypto, Wednesday’s CPI and Hormuz are measuring different sides of the same risk. CPI will show whether domestic price pressure is continuing to cool, while oil markets will reveal whether another inflation shock is beginning to build before it reaches the official data.
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