Inflation Report Dominates Investor Focus Amid AI Worries and Yen Carry Trade Unwind.

Economists anticipate a fall in the annual inflation rate to 2.5%, which could bolster expectations for an H1 2026 Fed rate cut. However, this scenario also heightens the risk of a yen carry trade unwind due to narrowing US-Japan rate differentials, driven by rising Bank of Japan rate hike expectations.

The probability of a March Fed rate cut has significantly declined, with June cut expectations also softening. The article provides technical levels for major US indices, suggesting a near-term bearish but longer-term bullish outlook for some.

Despite potential carry trade unwinds and geopolitical tensions, the overall sentiment remains cautiously bullish, contingent on the CPI report and the Fed's policy stance.