**Week Ahead: Earnings, Inflation Data, and Tariffs – Market Enters “Tunnel of Truth”**
*Adapted and expanded from an original article by Yohay Elam for FXStreet*
Financial markets are bracing for what many are calling the “Tunnel of Truth” — a crucial period that will bring clarity to investors regarding corporate earnings, inflation dynamics, and potential trade disruptions. The week is stacked with high-impact events that are expected to either reaffirm or challenge prevailing narratives about economic resilience, inflation trajectories, central bank responses, and geopolitical risks.
From quarterly earnings announcements to key inflation figures and emerging trade concerns, this period will likely dictate the near-term direction of forex, equities, and commodity markets.
Here’s a comprehensive breakdown of what traders need to watch and why it matters.
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## Key Market Themes to Watch
### 1. US Inflation Data: Clarity on Disinflation Trend?
The most anticipated release in the coming week is the US Consumer Price Index (CPI) report. Inflation has been sticky throughout the year, with data in the first quarter dashing hopes of a swift return to the 2% target. That has kept central banks — especially the Federal Reserve — cautious about cutting rates too early.
#### Why the June CPI Matters:
– The May CPI report showed a mild cooling, with core CPI (excluding food and energy) rising just 0.2% month-over-month — the lowest in six months.
– Markets are hopeful that June’s figures will confirm that the disinflation trend is finally resuming.
– A lower-than-expected CPI would encourage expectations for a Fed rate cut as early as September, while a hotter print could force markets to walk back those bets.
#### What Markets Expect:
– Headline CPI YoY: Forecast at 3.1%
– Core CPI YoY: Forecast at 3.5%
– MoM Core CPI: Forecast at 0.2%
The Federal Reserve has stressed the importance of seeing “several months” of good inflation data before acting. According to Chairman Jerome Powell, disinflation has resumed, but officials remain cautious.
#### Market Implications:
– A soft CPI could reinforce bets for an autumn rate cut, boosting risk assets like equities and weakening the dollar.
– A hot report would likely trigger a sell-off in tech stocks and raise Treasury yields in anticipation of rates staying higher for longer.
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### 2. Q2 Earnings Season Begins: Can Big Tech Still Deliver?
Earnings season is kicking off in earnest, and all eyes are on the major tech players. Big Tech — companies like Apple, Microsoft, Nvidia, and Alphabet — has been responsible for the majority of the S&P 500’s gains this year.
#### Key Earnings Callouts:
– JPMorgan Chase will report on July 12, kicking off financial sector results.
– Tesla, Netflix, and other giants are expected to follow in the coming weeks.
#### Central Questions:
– Can the Magnificent Seven continue delivering strong revenue and profit growth?
– Are companies managing to maintain or even expand profit margins despite higher input costs?
– What guidance are firms offering amid geopolitical risks and tightening consumer budgets?
Goldman Sachs recently revised its 2024 S&P 500 earnings forecast upward to $241 per share, citing improving economic data and continued strength from tech companies. Analysts expect overall earnings growth to be around 8% year-over-year for Q2, according to FactSet.
#### Market Fallout:
– Strong earnings and upbeat guidance could support stock indices and raise prospects of a soft landing for the economy.
– Weak results or cautious outlooks may revive fears of an earnings recession, especially if inflation stays sticky.
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### 3. Tariff Tensions Rising: The Trade War Narrative Returns
International trade tensions — specifically between the US, China, and the European Union — are back in the spotlight. Recent developments signal a re-escalation of trade barriers, particularly concerning China’s massive export push in clean
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