📊 Inflation Data and Yield Spreads: Market Reaction Scenarios Markets are now focused on the upcoming US February CPI release on Wednesday, March 11. The latest data showed headline CPI at 2.4% YoY and core CPI at 2.5% YoY in January, but the macro backdrop has shifted quickly. Oil prices surged amid escalating tensions around Iran and the Middle East, pushing inflation expectations higher and lifting US Treasury yields. As a result, traders are reassessing the timing of potential Fed rate cuts. 🔥 Hot CPI scenario: If inflation prints above expectations, markets may assume that rising energy costs are beginning to feed into broader price pressure. This would likely push short-term Treasury yields higher, strengthen the US dollar, and pressure risk assets. EUR/USD could struggle to extend gains, while gold and equities may face temporary downside as markets reduce expectations of near-term monetary easing. ❄️ Soft CPI scenario: If inflation surprises on the downside, markets may interpret the oil spike as a temporary geopolitical shock rather than a structural inflation trend. That could pull short-dated yields lower, weaken the dollar, and support a relief rally in equities, gold, and risk currencies. However, gains could remain limited if crude prices stay elevated. ⚠️ What traders should watch: The first reaction is likely to appear in US Treasury yields, especially the 2-year and 10-year, followed by moves in the US dollar and then broader risk assets. With Middle East tensions still driving commodity volatility, this CPI release could become a key test of whether the market’s inflation narrative is shifting again. 👉 Trade the macro reaction with NordFX: https://my.nordfx.com/en/regis...