SPEAKER_00 0:00

So imagine you're uh bailing water out of a sinking boat, right? And you're celebrating that the water level is going down, completely ignoring that there's this massive new hole forming in the hole right behind you.

SPEAKER_01 0:12

Yeah, that is uh pretty much exactly what the global economy is doing with inflation today.

SPEAKER_00 0:16

Right. Welcome to today's deep dive. We are actually pulling apart a July 16, 2026 pre-market briefing by Eli Levy.

SPEAKER_01 0:25

Right, over at Canon Trading Company.

SPEAKER_00 0:26

Exactly. And our mission for you today is decoding how this really shocking drop in inflation is reshaping global markets. And, you know, why that early celebration we just talked about might be dangerously premature.

SPEAKER_01 0:41

Because of the headline numbers, I mean, they certainly look like a victory. CPI decelerated to 3.5%.

SPEAKER_00 0:46

Which is a big deal.

SPEAKER_01 0:47

It is, yeah. But it was largely carried by a massive 5.7% monthly collapse in energy prices. So that's the water temporarily being bailed out of our proverbial boat.

SPEAKER_00 0:57

Aaron Powell But the core shelter and food costs, those are the stubborn leaks that just keep pouring in.

SPEAKER_01 1:02

Exactly. They haven't stopped.

SPEAKER_00 1:03

And the bond market's reaction to that lower water level was immediate. I mean, we saw a classic bull-flattened treasury curve.

SPEAKER_01 1:11

Aaron Powell Yeah. Well, short-term yields are just hypersensitive to the Fed's immediate next move. So when headline inflation cools that aggressively, those two-year yields just plummet fast.

SPEAKER_00 1:20

Aaron Powell Right, which flattens the curve against the 10-year. So the market is basically betting that this data gives the Fed enough cover to pause.

SPEAKER_01 1:28

Taking a September rate hike from a near certainty down to basically a coin flip.

SPEAKER_00 1:33

A total coin flip. But uh before we tear into why that bet might be completely wrong, we do need to read a quick disclosure, disclaimer. Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

SPEAKER_01 2:06

Right. So to understand the fragility of that Fed pause, we really have to look at the engine driving this whole CPI drop, which is the energy sector.

SPEAKER_00 2:14

Aaron Powell Because I am just not buying this victory lap on inflation. That CPI print feels like, you know, outdated, lagging data already.

SPEAKER_01 2:23

Oh, absolutely.

SPEAKER_00 2:24

Crude oil is sitting on a powder keg right now with U.S. airstrikes near the Strait of Hormuz. I mean, if conflict threatens global transit lanes, energy prices are going to spike again by next week. Trevor Burrus, Jr.

SPEAKER_01 2:36

And that completely wipes out the entire soft inflation narrative. The divergence is actually wild. You have the bond market pricing in their retrospective CPI drop, but commodities traders are aggressively pricing in those airstrips.

SPEAKER_00 2:49

The crude is just trapped.

SPEAKER_01 2:50

Totally trapped. You've got tightening U.S. inventories, pulling prices higher, plus that massive geopolitical war premium.

SPEAKER_00 2:57

But meanwhile, natural gas is telling a completely different story.

SPEAKER_01 3:01

But strictly due to a logistical bottleneck, there's a Freeport LNG outage trapping 2.4 billion cubic feet of supply domestically.

SPEAKER_00 3:09

Wait, so it literally cannot reach the global market.

SPEAKER_01 3:11

Exactly. So the domestic price is just tanking.

SPEAKER_00 3:14

Wow. And that geopolitical strain in the Middle East isn't an isolated event either. I mean, it is happening simultaneously with major disruptions in the Black Sea, which directly hits the global food supply.

SPEAKER_01 3:26

Aaron Powell Yeah. Wheat prices just surged to six dollars and seventy-seven cents.

SPEAKER_00 3:30

Because of the Ukrainian drone strikes on Russian ships, right?

SPEAKER_01 3:33

Right, which is paralyzing those shipping lanes. And it's not just the physical delay of grain, it's skyrocketing freight insurance premiums that immediately get baked into the price of wheat.

SPEAKER_00 3:43

And this geopolitical tension is peaking at the exact moment the US dollar is like losing its footing. It broke below the crucial 101 support level on the DXY.

SPEAKER_01 3:53

Which is huge.

SPEAKER_00 3:54

Yeah, because usually a weaker dollar is the ultimate tailwind for commodities. So if you're looking at your portfolio wondering why gold is stalling around $4,040 instead of skyrocketing on this dollar news, it feels completely contradictory.

SPEAKER_01 4:08

Well, the hesitation in gold isn't fundamental weakness. It is textbook profit taking. I mean, we are at record highs, and institutional traders are just taking chips off the table.

SPEAKER_00 4:17

Ah, okay. So what's the real barometer then?

SPEAKER_01 4:20

The real barometer for the physical economy right now is copper. It is aggressively breaking out above $13,500. Trevor Burrus, Jr.

SPEAKER_00 4:28

Driven by actual physical industrial demand rather than financial speculation.

SPEAKER_01 4:33

Exactly.

SPEAKER_00 4:34

Which ties perfectly into Levy's core thesis in today's briefing. These market moves aren't just algorithmic noise or traders squeezing each other's positioning.

SPEAKER_01 4:42

No, we are watching pure fundamentals, real supply and demand just fracturing under the weight of global flashpoints.

SPEAKER_00 4:49

And by the way, if you want to dig deeper into his analysis, you can reach the author directly at Eli at canon trading.com.

SPEAKER_01 4:55

Yeah, the physical economy is screaming that the systemic risks haven't gone away. They've just, you know, shifted sectors.

SPEAKER_00 5:01

Leaving us with a critical thought for you to carry into the trading day, we are celebrating falling inflation today almost entirely because of cheap energy.

SPEAKER_01 5:09

Right.

SPEAKER_00 5:09

But with both the Black Sea and the Strait of Hormuz simultaneously heating up militarily, how long until geopolitics forces inflation to come roaring right back?

SPEAKER_01 5:19

The water level is down for the moment, but the storm is far from over.

SPEAKER_00 5:22

Disclaimer: Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.