US Inflation Data Constrains the Fed: Global Risk Appetite Revitalizes

The most significant indicator of the US economy and the determinant of global monetary policy directions, the July inflation data, aligned perfectly with market expectations, reinforcing the perception that the Federal Reserve's aggressive rate hike cycle is nearing its end. The data's deviation from expectations alleviated pressure on emerging market assets, rekindling investors' risk appetite and limiting volatility in bond yields.

Data Meets Expectations, Averting Rate Shock

The headline Consumer Price Index (CPI) followed a trajectory parallel to market consensus, keeping the soft landing scenario for the economy alive. This situation signals that policymakers will adopt a more cautious and data-dependent stance in the monetary policy they will implement in the coming period.

■The annual inflation rate for July came in exactly as forecast at 3.2%, while the monthly increase remained at 0.2%.

■The flat trajectory of core inflation (excluding energy and food) was interpreted as a significant signal that price pressures are not becoming permanent.

■Following the data, US 10-year bond yields experienced a brief decline, while the depreciation of the dollar supported gold prices.

Risk Appetite and Liquidity on Algo-Trading Screens

With the reduction of uncertainty in macroeconomic data, algorithmic trading models began pricing in positive risk premiums. In particular, capital inflows to high-beta markets like the BIST 100 index are accelerating, while bullish signals in technical indicators are gaining strength.

■The decline in the VIX index shows that the market's fear index is normalizing and volatility arbitrage opportunities are increasing.

■The pullback in the Dollar Index (DXY) is breathing life into emerging market currencies and equity markets.

■In this period where sectoral rotation is accelerating, interest in technology and growth stocks is expected to increase.

From the technical analysis perspective, the direct reflection of this data on the BIST 100 is likely to appear as gap openings and increased volume. Reaction rallies at Fibonacci retracement levels are strengthening, and we are preparing for an attack towards the upper band of the Ichimoku cloud. Algorithmic trades will seek liquidity instantly during volatility spikes; therefore, I wish to draw attention to overbought zones (RSI > 70) in short-term indicators. With the rise in global risk appetite, the potential for foreign inflows to break our technical resistances is significantly high.