Inflation Is Rolling Over While The Curve Prices Hikes: The Cleanest Trade On The Board

Russell Thompson on soft CPI and PPI, mispriced Fed funds futures, Burnham liquidity framework

Bitcoin rallied off the lows last week, driven almost entirely by a broad and consistent downside surprise in inflation data. CPI, PPI and University of Michigan inflation expectations all came in soft, yet Fed funds futures now price an 86 percent probability of a hike one year out and zero probability of a cut. CLARITY enters its decisive week following the death of Lindsey Graham, with ethics provisions the remaining obstacle before summer recess effectively closes the window. Andy Burnham becomes UK Prime Minister today. Iran is re-escalating and oil has moved nine dollars higher on the week.

CLARITY Act: Live Or Die This Week

The CLARITY Act enters what is likely its decisive week. Lindsey Graham, a significant supporter of both President Trump and of CLARITY itself, has died, and Trump has been pushing for passage in his memory. Market pricing has improved modestly, with the Polymarket contract on 2026 passage at 39 percent when last checked. Russell regards that as too low and continues to view passage as more likely than not, but the path has narrowed. With Graham gone, the number of Democratic votes required has risen, and the count now looks like roughly nine Democrats plus a couple of Republicans who may be shaky. The remaining sticking point is ethics. Democrats are seeking provisions that would effectively construct a firewall between the President and his business interests in crypto, constraining how he can engage with the sector. Russell does not expect that to be well received. Brooks and Galardo, two Democrats who had been high on the list of CLARITY supporters and who voted for it in the House, have stated they will not support the bill without ethics provisions. A final draft has reportedly been written and is being circulated, but it has not been finalised or agreed. The timing constraint is the binding one. If meaningful progress is not made this week, the bill runs into the summer recess, and once recess ends attention turns to the midterms. Russell’s assessment is that failure to move now leaves CLARITY dead in the water. He expects a week of heavy he adline flow and horse- trading around the ethics language. The window is closing: CLARITY either progresses this week or runs out of legislative time. Summer recess follows, and the midterm cycle absorbs congressional bandwidth thereafter. Polymarket at 39 percent for 2026 passage is, in Russell’s view, below fair value · but the ethics firewall is a genuine obstacle, not a procedural one.

UK: Burnham Takes Office, Mahmood Likely Chancellor

Andy Burnham becomes UK Prime Minister today, having delivered his maiden speech in Parliament last week. The speech was, as anticipated, heavily northern in focus and consistent with his prior positioning. Russell does not expect markets to like Burnham, and went further: he would not rule out the UK approaching the IMF at some point in the next six months. Burnham is on the left of the Labour Party even by internal standards. The offsetting development is the Chancellorship. Burnham appears unlikely to back Miliband, with Shabana Mahmood the probable appointment. Mahmood is widely viewed as a fiscal hawk and sits on the right of Labour, which Russell regards as materially important for market perception. Sterling bounced and gilts rallied on the news. The caveat is experience: Mahmood has effectively no fiscal or monetary background, having served as an undersecretary in the justice department. Elsewhere, South Korea was down heavily overnight; the rest of the global macro picture was largely unchanged. Market read on the UK: Sterling bounced and gilts rallied, but the rally is a Chancellor trade rather than a Prime Minister trade. Mahmood’s fiscal-hawk reputation and position on the right of Labour are what markets are pricing. The experience gap and Burnham’s own politics remain the medium-term risk.

Macro: Inflation Data Came In Soft Across The Board

Bitcoin’s rally off the lows last week was driven almost entirely by weaker-than-expected inflation data, a dynamic Russell has been flagging repeatedly. Inflation expectations have been quietly coming off in the background with limited market attention, and last week the realised data followed. CPI fell sharply on the month to 0.1 percent, and the year-on-year rate dropped to 3.5 percent against 3.8 percent expected. Russell characterised these as very large moves. PPI came in at minus 0.3 percent on the month against zero expected, with the year-on-year rate at 5.5 percent versus 6.2 percent expected. Retail sales landed on the money at 0.2 percent. The University of Michigan survey, which Russell singles out as his preferred series, reinforced the picture. One-year inflation expectations came in at 4.2 percent against 4.6 percent previously, and the five-year at 3.3 percent. Consumer sentiment improved to 54.1 from 51. Taken together this is a weak inflation print, a weak inflation-expectations print and an improving consumer · a combination Russell describes as very market friendly and specifically Bitcoin friendly. His conclusion is that the hawkish sentiment still embedded in these markets is misplaced. Indicator Actual Expected Verdict Sharp deceleration CPI (MoM) 0.1% 0.1% Large downside miss CPI (YoY) 3.5% 3.8% Downside miss PPI (MoM) -0.3% 0.0% Large downside miss PPI (YoY) 5.5% 6.2% Retail sales 0.2% 0.2% In line U. Mich 1yr inflation exp. 4.2% 4.6% prev. Lower U. Mich 5yr inflation exp. Contained 3.3% · U. Mich consumer sentiment 54.1 51.0 Beat Source: Hilbert Trader’s Call 20 July 2026

Fed Pricing: An 86 Percent Hike Probability Against Falling Inflation

Despite the data, the soft prints have barely moved Fed funds futures. For the 29 July meeting, the curve prices a zero percent chance of a cut, 86 percent hold and 14 percent hike. By year end, pricing shows zero percent cut, 19 percent hold and 81 percent hike. One year out, the market prices a 1 percent chance of a cut, 13 percent hold and an 86 percent chance of a hike. Russell described this pricing as absolutely insane and considers positioning for one-year-forward Fed funds futures to be lower than spot as close to a no-brainer. The underlying view is one Russell has articulated for some time: Warsh is a monetary dove and a balance sheet hawk. On that framework, rate cuts are more likely than not, and the requirement is simply that the inflation data continues to improve · which it clearly did last week. The US calendar this week is light, with global manufacturing and services PMIs on Friday the only material releases. The larger releases come out of Europe, with the ECB meeting this week alongside inflation and unemployment data from both the eurozone and the UK. Burnham’s first week in office therefore begins against a UK inflation and employment print. Russell Thompson, CIO "I think those numbers are absolutely insane, and I think that Fed funds futures one year out being lower than where they are now is almost a no-brainer trade. Warsh is a monetary dove and a balance sheet hawk. It is more likely than not that we are going to get rate cuts."

Markets: Oil Reprices On Iran, Equities And Gold Give Back

US rates were broadly unchanged, with the ten-year at 4.57 percent, down a basis point on the week, and the two-year at 4.28 percent, leaving the two-to-ten spread around 37 basis points. Equities were softer: Nasdaq sits at roughly 28,500 having fallen 900 points on the week, with the S&P around 7,450. Gold gave back around 60 dollars to trade at 4,013. The dollar index was largely inert at 100.75. The clear mover was energy. Iran appears to be gearing back up again, and crude has repriced accordingly. WTI is up at 83 dollars and Brent at 88, both roughly eight to nine dollars higher on the week. Natural gas has been comparatively stable at 2.88. The reintroduction of a geopolitical risk premium into oil is the principal offset to an otherwise disinflationary data set, and is the main channel through which the Iran situation feeds back into the inflation debate. Oil is the offset: WTI at $83 and Brent at $88, up eight to nine dollars on the week on Iranian re-escalation. If sustained, energy is the one component capable of interrupting the disinflation trend that drove last week’s Bitcoin rally and that underpins the case f or fading hawkish F ed pricing.

Hilbert Global Liquidity Index: New Framework Goes Live

Hilbert is beginning to include its proprietary global liquidity indices in the weekly call. An accompanying paper has been drafted and is expected to go out shortly. The framework consists of a five-factor and a six-factor model measuring the level of global liquidity, the movement of liquidity between the financial system and the real economy in both directions, and the rate of change of that movement. Russell describes it as highly predictive of the Bitcoin price. The models capture Federal Reserve liquidity, reverse repo operations and movements in the Treasury General Account. The indices are scaled from zero to ten. The five-factor model currently reads 6.71 and the six-factor model 6.62, both indicating moderate liquidity expansion. The one-day Z-score is minus 0.64, a minor liquidity contraction; the five-day reading is around a quarter of a point higher, and the twenty-one-day is minus 0.31. This is consistent with Hilbert’s existing framework, under which a significant movement of liquidity out of the financial system and into the real economy began in October last year, bottomed in June 2026, and is now showing moderate expansion back. The current setup is supportive without yet constituting rapid expansion. Liquidity metric Reading Interpretation Five-factor model (0·10) 6.71 Moderate liquidity expansion Six-factor model (0·10) 6.62 Moderate liquidity expansion Z-score, 1 day -0.64 Minor liquidity contraction Z-score, 5 day -0.39 Improving from 1-day reading Z-score, 21 day -0.31 Mildly contractionary Cycle position Moderate expansion resuming Post-June 2026 trough Source: Hilbert proprietary global liquidity framework, Trader’s Call 20 July 2026

Volatility: Implied Reclaims Realised, Put Skew Persists

Implied volatility has moved back above realised, reversing last week’s unusual configuration. Implied sits around 32.6 against realised at 29.6, a premium of roughly three points. Last week realised was above implied, a rare condition that makes selling option volatility structurally problematic. DVol is around 36, down a couple of points on the week. The skew remains firmly in place. Five-delta put volatility is around 46 percent against five-delta calls at 35 percent, an eleven to twelve point premium for puts over calls that has persisted for several months. The consequence is that the skew and smile continue to offer materially better value in selling puts than in selling calls. Calls out at the five-delta wing are actually trading at a discount to at-the-money, which Russell notes has been the case for a while but remains highly unusual. Structural read: An eleven to twelve point put-over-call premium at the five-delta wing, sustained over months, alongside call wings discounted to at-the-money. The market continues to pay heavily for downside protection while showing little appetite for convex upside · positioning that sits awkwardly against a soft-inflation, improving-liquidity backdrop.

Bitcoin Technicals: Short-Term Bullish, Medium-Term Work To Do

The short-term technical stance on Bitcoin remains bullish. The momentum signal turned bullish on 7 July and is still in place. The obstacle is above: Bitcoin needs to climb through a substantial wall of selling sitting between 68,000 and 74,000. Until that region is cleared, the medium-term technical framework cannot turn bullish, and Russell was explicit that despite a good week, price needs to be materially higher from here for that to change. On the downside, there is support around 63,000, with a further layer at 58,000 and then 55,000 below that. Russell would not want to see 55,000 break. Gamma positioning reinforces both levels: topside gamma kicks in at 68,000, while downside gamma kicks in on a break of 60,000, meaning market makers are likely to be chasing the market through either level. In DeFi, Ethena TVL stands at 4 billion dollars, up 100 million on the week, with USDe yielding 4%. BTC level Significance 68,000·74,000 Major wall of selling; must clear for medium-term bullish 68,000 Topside gamma kicks in; market makers chase 63,000 First support 60,000 Downside gamma kicks in on a break 58,000 Second support layer 55,000 Line Russell does not want to see break Source: Hilbert Trader’s Call 20 July 2026 intended for professional and institutional investors only. Hilbert Group AB is listed on Nasdaq First North Growth Market.