Last week's thesis hinged on a condition. Waller's rally would depend on this week's inflation data confirming what he said he was hoping to see.

The first data point has now arrived, and it leaned the other way.

Oil is doing most of the damage.

Brent broke above 101 dollars Wednesday. Today it pushed past 107, as direct US-Iran military strikes widened further, including reported attacks on Kharg Island and the port of Jask.

The Treasury tried to intervene again this week, and fell short of its own commitment.

It bought back 5.19 billion dollars in debt, below the amount previously outlined.

Ten year yields moved to multiyear highs anyway. The S&P 500 fell for a fourth straight session, its longest losing streak since June.

Then came the data Waller's statement was conditioned on.

Producer prices showed renewed pressure from rising energy costs, a day ahead of tomorrow's CPI release.

CPI itself is expected to show modest core inflation, even as higher gasoline prices lift the headline number.

Fed officials have said the rate decision at next week's meeting could depend on what this week's reports show.

That's the thesis.

The market spent last week pricing a hold, on the assumption inflation data would cooperate.

The first piece of that data didn't. Hike odds for next week's meeting rose to 70 percent, with a move by October now fully priced.

The distinction between headline and core CPI matters more this week than most.

A hot headline print driven by gasoline is a different signal than broadening core pressure, and officials weighing next week's vote will likely draw a clear line between the two.

"Will the Fed hike in September?"

"Does tomorrow's core number separate an oil shock from genuine inflation pressure, or does headline noise carry enough weight to move the vote anyway?"

A conditional statement only holds as long as the condition does. This week, the condition started to slip before the meeting even arrived.

Strengthen your edge. See the risk MT5 hides.