BofA survey shows record 54% expecting 'no landing' as CPI looms. Waller signals July hike if core inflation beats 0.2%. Oil above $80 on Iran risk.
European trade was quiet, with most pairs grinding inside familiar ranges ahead of the US CPI print. The calm masked a lopsided positioning picture.
Bank of America's July Fund Manager Survey showed a record 54% of respondents expecting a 'no landing' scenario – growth stays hot, inflation stays sticky – while just 2% saw a 'hard landing'. Long semiconductors was the most crowded trade on record. BofA noted that 'no one' is short the trade. 83% of investors did not expect a Fed rate hike before the November midterms.
Those are extreme readings. The contrarian trades that follow: short the Nasdaq on crowded tech positioning, long 10-year Treasuries against the record 'no landing' view, long the dollar on the low odds of a near-term hike, and long oil on a lower year-end price forecast.
Oil crept higher, with WTI climbing above $80 as US-Iran tensions added a supply-risk premium. The Strait of Hormuz chatter is back. The US NFIB Small Business Optimism Index rose to 97.4 in June, beating the 95.7 consensus. Lower fuel prices earlier in the month helped, though inflation remained the top concern and firms still struggled to find qualified workers.
The session's main event is the US CPI report at 8:30 a.m. ET, alongside Fed Chair Warsh's testimony. Headline CPI year-on-year is expected at 3.8%, down from 4.2%. The month-on-month measure is seen at -0.1% versus 0.5% prior. Core CPI year-on-year is expected at 2.8% versus 2.9%, with the month-on-month figure at 0.2% – unchanged from last month.
Fed's Williams said he would consider rate hikes if monthly core inflation, using the PCE measure, runs above 0.2% in the second half. Fed's Waller made it clearer yesterday: today's report would be enough for him to vote for a July hike if the data beats forecasts. Waller has been a reliable leading indicator since 2021.
The only number that matters is core CPI month-on-month at 0.2%. Everything else is noise until that print crosses the tape.
For more on how the dollar and pairs are positioned, see the forex market analysis page.
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