Good morning, traders,
In yesterday’s e-letter, we talked about Fed Chair Jerome Powell standing his ground on inflation Tuesday, refusing to adjust interest rates until the full economic situation becomes clearer.
And that’s despite plenty of pressure from Donald Trump and some central bankers.
But Friday morning, we’re going to get hit with a flurry of data that could throw cold water or rocket fuel on just about everything.
I’m talking about PCE numbers.
If you’re trading and not paying attention to these, you’re driving blind.
This isn’t CPI. This is the inflation metric the Fed actually cares about.
It’s the one they talk about in meetings, and it’s the one Powell’s watching closely.
We’re getting the PCE index, the year-over-year figure, and the core versions of both. These give us the cleanest read on whether inflation is still sticky or finally cooling off.
Here’s how to handle the numbers regardless of their temperature.
Cold, Hot, Cold
Wall Street expects this thing to come in calm: Core PCE up just 0.1% month over month, and a 2.5% annual pace.
If we hit that, or even come in softer, you’re going to hear the market cheer.
Think: stocks up, bond yields down, dollar maybe slipping a bit.
Rate cut odds for September could shoot higher.
That means risk-on trades could work, and the options market could see a spike in premium selling.
IV will likely get crushed on a soft print.
But let’s say the numbers come in hot.
Now we’re in different territory.
If Core PCE prints at 0.2% or higher, or if that year-over-year number creeps above 2.6%, forget the rate cut in July or September.
You’ll probably see bonds get slammed as yields jump, stocks take a hit, and the dollar rally.
In short: Traders will go back into risk-off mode.
Look for the Pain
This is where positioning matters.
The options market has been pricing in a Fed that’s eventually going to cut, but not in a rush.
If inflation looks sticky again, that whole narrative gets reset.
That means volatility spikes, spreads widen, and directional trades get punished if you’re not fast.
Now, I know what you’re thinking — how do I play it?
You don’t guess the number. You set yourself up for the reaction.
You look at your charts this afternoon and ask, “Where’s the pain for the most people?”
That’s your clue.
Then you prepare for volatility.
And if you’re more into premium selling, watch IV crush post-report.
A cooler number might give you a solid opportunity to sell short-dated premium into a Friday expiration.
But don’t forget, the first move isn’t always the right one.
Watch the second push after the open. That’s where the real direction gets confirmed.
Friday’s numbers are no small blip. They could set the tone into the July FOMC meeting.
And if you’ve been trading long enough, you know sentiment turns fast when the Fed feels boxed in.
Bottom line: Don’t get caught reacting.
Get in front of it. Know your risk, plan your exits, and don’t fall in love with your trades.
One bad number can wipe out a week of good setups.
Stay street smart,
Jeff Zananiri
P.S. Today at noon ET, Aaron Hunziker will talk about the fastest-growing opportunities in the market right now:
These contracts move fast and hit big. Learn to trade them the right way.
👉 [Save your seat now — before space fills up.]
