United States: Inflation risks but still contained - TD Securities

TD Securities forecasts August Core Consumer Price Index (CPI) at 0.19% month-over-month (m/m) and 2.3% year-over-year (y/y). Services are projected to drive gains while core goods exhibit slight negativity. Headline CPI is expected to be higher, at 0.37% m/m and 3.4% y/y, driven by increased energy and food prices. The bank highlights potential upside risks from assumptions of significant price reductions in tariff-exposed goods categories, such as apparel and household items.

The bank anticipates the August CPI report to indicate underlying inflation remains contained, with core likely increasing by 0.19% m/m (2.3% y/y). Services are expected to be the primary contributor, while core goods may act as a drag with a modest month-over-month decline. The bank perceives the risks as skewed to the upside, assuming substantial price declines in the mentioned goods categories.

This will also mark the first month of PCE with the Bureau of Economic Analysis (BEA) revisions, which is expected to suppress core inflation by approximately 0.2 percentage points. Inflation concerns persist, as indicated by comments in last week's ISM surveys. The USD/USD pair consolidates below its mid-May high and hovers around 0.7200 at the beginning of a new week, benefiting from hawkish expectations from the Reserve Bank of Australia (RBA).

Upbeat US employment data further strengthens the safe-haven US Dollar, while escalating tensions between the United States and Iran bolster the currency, limiting its strength. USD/JPY continues its decline, reaching seven-month lows near 154.00, as the Bank of Japan (BoJ) faces increased pressure for rate hikes and repatriation of funds.

Gold experiences a setback following a decline in the US Dollar and cautious market sentiment ahead of critical US data releases. Gold retraces to the $4,400 mark per troy ounce on Monday. Bittensor gains momentum on Monday, continuing a five-day upward trend and achieving a 25% increase. Social media attention towards Bittensor surges alongside a similarly named meme coin on Solana and the launch of ChatGPT-6 Astra.

The technical outlook for TAO remains bullish, as momentum strengthens, and buyers target the $300 breakout. The oil market appears calmer than it was a few months ago, but diesel presents a contrasting narrative. The US diesel crack spread, the premium of ultra-low sulfur diesel futures over West Texas Intermediate (WTI), recently surpassed $100 per barrel for the first time, reaching an intraday record of just over $102.00.