CPI In Line, Equities Up, Dollar Down; Geopolitical Tensions Persist

Lead US CPI data for July came in as expected, showing a 0.1% month-over-month increase and a 3.4% year-over-year rise. This has led to a positive reaction in equity markets, with S&P 500 futures up 0.49% and Nasdaq futures up 1.00%. The US Dollar Index is down 0.15%. Geopolitical tensions remain a key focus, with reports of Kyiv under drone attack and Ukraine striking Russia's Novorossiysk Naval Base. Oil prices are up, with WTI crude gaining 0.45%. Session narrative US equity futures are broadly higher following the release of July's CPI data, which aligned with expectations. S&P 500 futures are up 0.49%, Nasdaq futures have climbed 1.00%, and Dow futures are up 0.30%. The US 10-year yield has fallen 0.55%, and the US Dollar Index is down 0.15%. Gold is up 0.99%, nearing a 10-week high. In commodities, WTI crude is up 0.45%, and Brent crude is up 0.20%, driven by ongoing geopolitical concerns including reports of reduced shipping traffic through the Strait of Hormuz. Natural gas is also up 1.87%. Geopolitical developments continue to unfold, with Kyiv experiencing drone attacks and Ukraine claiming strikes on Russia's Novorossiysk Naval Base. Iran is reportedly considering prolonging the war until a change in US administration. Fed Fund Futures show a 49.9% probability of the target rate at 3.50%-3.75% and 50.1% at 3.75%-4.00% for the September meeting. Cross-asset check Equity futures are showing strength, with Nasdaq futures leading the gains at 1.00%. The S&P 500 futures are up 0.49%, and Dow futures are up 0.30%. The US 10-year yield has declined by 0.55%, while the US Dollar Index is down 0.15%. Gold has seen a significant rise of 0.99%, approaching a 10-week high. Silver is up 2.66%. In energy markets, WTI crude is up 0.45%, and Brent crude is up 0.20%. Natural gas is up 1.87%. The EUR/USD is up 0.11%, and the GBP/USD is up 0.22%, while the USD/JPY is down 0.22%. The VIX is down 0.58%. Themes & continuing stories The primary themes continue to be inflation and monetary policy, particularly after the inline CPI report. Geopolitical tensions remain a significant driver, with ongoing conflict in Ukraine and heightened concerns in the Middle East impacting commodity markets. The Strait of Hormuz traffic remains low, contributing to oil price volatility. Discussions around the Federal Reserve's September rate decision are ongoing, with the inline CPI data potentially easing pressure for aggressive hikes. The market is also watching for any further developments regarding Iran's stance on the conflict and US relations. What’s ahead No major economic data releases are scheduled for the remainder of the US session. The focus will remain on geopolitical developments, particularly in Ukraine and the Middle East, and their potential impact on commodity prices. Traders will also continue to digest the implications of the July CPI report on the Federal Reserve's monetary policy outlook for the upcoming September meeting.