US consumer prices fell 0.4% in June — the first monthly decline in six years and the sharpest since 2020 — dragging annual inflation down to 3.5% from 4.2% in May. Economists had expected 3.8%. Core CPI was flat on the month at 2.6% year-over-year, also below consensus. The driver was almost entirely energy: the steepest gasoline slide since 2022, after crude collapsed roughly 25% in June on the short-lived US–Iran memorandum of understanding.

Markets repriced immediately. Odds of a July rate hike collapsed from 42% to 17% on CME FedWatch, though traders still price one 25bp hike later in 2026, with September the favored window. Producer prices land Wednesday morning and feed straight into core PCE, the Fed's preferred gauge.

The man interpreting all this, Kevin Warsh, delivered his first congressional testimony as Fed chair this week — House on Tuesday, Senate Banking today — and stayed unmistakably hawkish, vowing to make the five-year inflation surge "a thing of the past" while refusing to give forward guidance or even submit his own forecasts. Translation: a soft print buys time. It doesn't change the reaction function.

The interim US–Iran agreement has effectively collapsed. American forces reimposed the naval blockade and struck Iranian targets for a third consecutive night, while Tehran hit more tankers transiting the Strait of Hormuz. Brent surged to $85.77, its highest in more than a month, after posting its biggest one-day gain in over six years on Monday. WTI traded above $80 intraday for the first time since June 17 before settling just below.

One de-escalation note: Trump abandoned his demand for a 20% fee on all Hormuz transits after the world's largest shipping association warned the levy would simply push traffic away from the waterway entirely. That took oil off its session highs, but the risk premium remains. Energy stocks outperformed on both sides of the Atlantic; travel and consumer names slumped; European bond yields climbed as the oil spike reignited inflation fears.

The macro whiplash is the real story here. June's soft CPI was overwhelmingly an energy story — and July's oil chart is running that tape in reverse. As Regan Capital's CIO noted, the inflation relief may prove temporary, and Warsh's Fed has left itself zero room to sound dovish if crude keeps climbing.

Q2 earnings season opened Tuesday with the big banks clearing every bar. JPMorgan beat on revenue and profit and rose 2.5%. Bank of America earned $1.21 per share against a $1.13 consensus on $31.7 billion in revenue, and Wells Fargo also topped forecasts. Citigroup and Goldman Sachs reported the same morning. Bloomberg Intelligence expects S&P 500 earnings to grow roughly 24% year-over-year this quarter — a high bar the banks just made look reachable.

The other half of the screen was ugly. IBM cratered roughly 25% — its worst single day on record — after warning that enterprise clients are diverting budgets away from software and mainframes toward AI infrastructure. HCA Healthcare also fell hard.

The AI trade itself, meanwhile, rallied: Applied Materials, Teradyne and Monolithic Power all jumped as a recovery in SK Hynix and Samsung lifted US chip peers. The Nasdaq gained 0.9% to 26,107, the S&P 500 added 0.4% to 7,543, and the Dow closed flat, weighed down by Big Blue. Same theme, two directions: AI capex giveth, and AI capex taketh away.

Bitcoin jumped roughly 4% over the past 24 hours to trade just under $65,000, its strongest session in weeks, after Tuesday's cool CPI print gutted near-term rate-hike odds. The 24-hour range ran from about $62,400 to $65,200. Ether outperformed, up nearly 6% toward $1,900, while Solana and XRP gained 3.5–4%. Context check: BTC remains roughly 48% below its $126,000 all-time high, and one strong week of ETF inflows doesn't yet make a demand recovery.

Two subplots worth your attention. First, South Korea: a meltdown in the KOSPI sent local retail flooding into crypto, with Korean trading volumes soaring as equities sold off — a classic risk-migration pattern, and not automatically a bullish one.

Second, the US government moved $288 million in seized bitcoin and ether — coins from the Farace and BTC-e caseloads — through fresh wallets and onto Coinbase Prime, despite the standing no-sell order on the strategic reserve. Nobody knows yet whether this is custody housekeeping or the prelude to a sale, but markets have been burned by government wallets before. Watch the flows, not the statements.

Mizuho downgraded Circle to underperform and slashed its price target 41%, from $85 to $50, arguing that Open USD — the stablecoin unveiled June 30 by a consortium of 140-plus partners including Mastercard, Stripe, BlackRock and Coinbase — attacks the heart of Circle's business model: retaining most of the treasury yield on USDC reserves. Open USD passes that yield through to distributors. Mizuho now sees distribution and transaction costs eating 73% of Circle's 2027 revenue, up from 64%, and cut its 2027 EBITDA estimate to $699 million — about 25% below consensus.

JPMorgan piled on the same day, cutting estimates for both Circle and Coinbase. The trigger: the revamped Hyperliquid arrangement, under which Coinbase books Hyperliquid's roughly $6 billion in USDC — about 8% of circulating supply — as on-platform balances and hands 90% of the reserve income to the protocol. JPMorgan called the setup a "prisoner's dilemma" that pushes Circle and Coinbase to compete against each other on distribution terms.

The kicker: USDC supply has slipped to about $73 billion from nearly $80 billion in March, and the Circle–Coinbase revenue-share agreement comes up for renewal in August — with Coinbase now holding an Open USD card in its hand. CRCL trades in the low $60s.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.