Get ready for CPI – US Inflation Preview

The trading world awaits the final piece to this week's US economic puzzle, with the US Consumer Price Index (CPI) releasing tomorrow at 8:30 A.M. (ET).

After a cold Retail Sales (0% vs 0.4% exp) and a surprisingly strong Non-Farm Payrolls report (130K vs 70K exp), the third wave of high-tier US data should provide the answers for early 2026 rate cut pricing (and if they are even still a thing).

The Federal Reserve had pivoted within its dual mandate, putting less emphasis on the inflation mandate and prioritizing a visibly weakening labor market, to justify the streak of 25 bps cuts between September and December 2025, from 4.50% to the current 3.75%.

Ahead of these cuts, the Fed held a frustrating pause (at least frustrating for President Trump) since December 2024.

After the massive -140K drop in October, Non-Farm Payrolls rebounded through a gradual recovery and haven't reported a figure below +40K since. Hence, communications from the Fed quickly turned back to inflation.

Core CPI, which excludes volatile Energy and Food prices from the headline Index, remained much closer to 3% than the 2% mandate throughout 2025, with the effects of the infamous Trump Tariffs delaying post-COVID inflation drops further (compared to what was seen in Canada, for example). And that hasn't sat well with the Fed.

Tomorrow's report should bring further clarity to the US CPI releases, which had previously been obscured by the longest-ever Government shutdown in October, which prevented precise data collection.

Both the Headline and Core CPI are expected to release at +0.3% m/m, taking the year-over-year data to 2.5% for both.

Comforting for the Fed? Maybe, but this release should also be affected by last year's high-base effect (January 2025 Core CPI was at 3.1%!), and hence provide more sensitivity to any beat.

Producer Prices tend to be reflected in CPI between 3 and 6 months after their rise, but the more lasting effects may even take more than a year.

For those who forgot, PPI sent out a major warning about tariffs in July 2025: We are entering the final periods to observe significant effects from the Trump Policies, and the Fed will be watching closely.

It has a few of the most hawkish regional members on the voting chairs in 2026 (Hammack and Logan), so thresholds for cuts will be high.

Markets are at a sensitive inflexion point, with Equities still at or very close to their all-time highs (despite huge routs in the Tech and Software Sectors) and extreme trends looking fragile, as seen this morning with the large drops in Gold and Silver.

If things turn sour, Stocks and Metal Markets could quickly see a Crypto-like bear market for the foreseeable future, as Participants will be forced to deleverage.

Let's discover reactions to see why.

The following FOMC Rate Decision will be announced on March 18 and is currently priced at only 8% (from 23% pre-NFP), leaving little room for a correction at this meeting.

However, there are still about two cuts fully priced in for the rest of the year.

Markets are impossible to predict fully; hence, these scenarios could elicit quite different reactions.

This would kick the can down the road for policy pricing, being the final influent data release before February 27 (PPI).

Stock Indexes:

An as-expected data will send Stock Markets to a quick test of their recent all-time highs, but the effect should slow down throughout the session. After the data, expect Indexes to keep consolidating at their highs (48,000 to 50,000 for the DJIA) in the waiting for more clarity.

Metals:

After today's large drop, metals should continue seeing progressive outflows – Silver back to $70 and Gold hanging around $4,200 to $4,400

Cryptos:

Cryptos should rally initially but the rise shouldn't be long-lasted. It could at least prevent a consistent drop lower, back to a more rangebound action in Bitcoin (between $70,000 to $80,000).

US Dollar:

Initial push lower but should stabilize above 2026 lows before reverting higher and maintain its rangebound trajectory.

Rate Cut pricings:

The March meeting should see its pricing rise back towards 20%. Further changes will be contingent for a larger rise depending on the state of Markets until future data lands (if Stocks dip strongly, expect rate cut odds to rise)

This is the worst case scenario for all assets which have rallied throughout the 2025 Debasement Trade.

Stocks, Metals and Cryptos should all drop lower, with short-end yields rising strongly in a bear flattening curve, profiting to the US Dollar (rallying back to at least 98.00).

The extent of the moves will depend on how strong the beat is. +0.1% to expectations should see modest moves, but anything above 0.3% will see large repricings.

Expect to only see one more cut priced in for 2026 in that scenario.

This is what Markets are salivating for the most.

Stock Indexes should all rally to some new all-time highs, with the Dow Jones potentially testing 51,000.

Nasdaq should also retest its 26,200 and even extend further.

The US Dollar will see a shift drop to some new 2026 lows as pricing for a March meeting cut can rise to above 50%.

Cryptos and Metals should also see a decent rebound in that event, profiting from the drop in the US Dollar.

Both asset classes would however need a significant drop in CPI to head back to their all-time highs, with both of their Markets troubled by pessimistic sentiment and positioning.

After swift rises, the action should settle, with leverage and positioning still elevated. Nevertheless, expect the recent descending trends to cease and sentiment ease.

The extent of such reactions of course depends on how large the miss is.