Cooler US inflation gives markets a bit of a breather

AI summary

<p class="text-align-justify" style="text-align: justify;">The US inflation pulse stole the spotlight yesterday, as the June CPI report came in softer than anticipated. In case you missed it: <a href="https://investinglive.com/news/us-june-cpi-3-5-vs-3-8-expected" rel="follow">US June CPI 3.5% vs 3.8% expected</a></p><p class="text-align-justify" style="text-align: justify;">Despite what the headlines might suggest, the drop in June owes much to a marked fall in gasoline prices. Month-on-month CPI inflation fell by 0.4%, which was the biggest monthly drop since May 2020.</p><p class="text-align-justify" style="text-align: justify;">However, the US-Iran conflict has now restarted and oil prices have already climbed by roughly 14% already since the turn of the month in July. Adding to that, it's tough to say if gasoline prices will continue to reflect more of this deflationary trend when the refining market remains ever so tight.</p><p class="text-align-justify" style="text-align: justify;">The only other good news is that core prices did cool as well, with not much evidence of a major boost from the World Cup. And tariffs inflation spillover continues to be at a minimum for the most part.</p><p class="text-align-justify" style="text-align: justify;">But if higher energy prices are going to stick around for longer, that will eventually translate to other segments of the economy and indirectly bolster price pressures down the road. So, there is that to keep in mind and be wary