Analysts at JP Morgan offer various scenarios for the United States Consumer Price Index (CPI) data due on Thursday and its market impact.

Key quotes

“Investors are largely defensively positioned ... any evidence that the Federal Reserve’s inflation-fighting campaign is working will spark a rush to unwind bearish positions.”

“This should aid the nascent bear rally, but we remain cautious as long as the Fed remains active with its tightening cycle.”

“Our scenario analysis is skewed bullishly based upon positioning that could cause an overreaction via short-covering on a dovish print.”

“A repricing of expectations for a pause in the tightening cycle at the Fed’s March meeting seems likely only if CPI prints below 4.5% to 5%.”

“If the CPI is higher than 6.6%, it is expected to hit risky assets with bond yields rising along the curve.”

“A reading above 6.8% threatens to shock investors with what the team calls “a tail event.”