Markets cheered this week as U.S. inflation came in as expected and was lower year over year. The July consumer price index clocked in at 2.9% compared to last year, beating the 3.0% forecast. Investors took this as a sign that the Fed might ease up on interest rates soon, although it's far from the 2% target, and stocks went on a bit of a tear. Meanwhile, bonds picked up on the inflation news, with yields taking a dip, and the dollar lost some ground against other major currencies. Investor focus has now shifted to the Federal Reserve's forthcoming decisions, with some market participants anticipating rate cuts as early as September and as much as a 36% chance of a 50 bps cut.

EQUITY

The S&P 500 notched five winning days in a row, and the good vibes spread to Asian markets too, although worries about China's economy kept things from getting too excited. The VIX retreated to almost 15, historically the fastest return to a low-volatility condition. Starbucks closed only 2% lower after an initial 24% expansion to the upside after acquiring Chipotle CEO. The Kellanova agreement for confectionary giant Mars acquisition made it Wednesday's best performer, with another 30% potential upside for the purchase amount.

GOLD

The gold price showed a slight recovery after inflation data dragged it lower, that may have also triggered profit-taking activity. This uptick is attributed to a ranging U.S. dollar and Treasury yields. Gold remains below the $2,500 mark, although a new all-time high is hopeful for bigger rate cuts.

OIL
Oil prices stabilised on Thursday, with a slight increase driven by optimism that potential U.S. interest rate cuts could boost economic activity and fuel consumption. However, weaker global demand saw prices drop for two consecutive sessions due to unexpected increases in U.S. crude inventories, which eased fears of Iranian retaliation as world leaders called for peace.

CURRENCY

The U.S. dollar dipped following the release of July's inflation data but perked back up and continued in consolidation as the market awaited retail sales data to gauge market direction. Although a 50 basis-point cut is considered unlikely, it would be volatile if more participants priced it in. For a more substantial rate cut to occur, the upcoming August labour market report would need to show significant weakness.