The CPI trade: What JPMorgan sees the market doing, based on these scenarios

Investors this week will turn their attention to the latest consumer price index report, as fears that the Federal Reserve will have to keep raising rates weigh on sentiment. CPI is expected to to have risen by 3.1% in June from the year-earlier period. Excluding food and energy, they forecast a 5% advance.

"We could see rate hike expectations for July fall; in our view if you saw those expectations fall under 45% then we may see the Fed capitulate and do another 'hawkish skip' since we would have seen inflation largely normalize before feeling the full effects of the tightening cycle," JPMorgan's trading desk said. 15% probability — CPI between 3.3% and 3.

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