Morgan Stanley Research previews the US July CPI report due on Wednesday.

"We forecast core CPI at 0.24% m/m (2.5% y/y) and headline CPI at 0.10% m/m (3.4% y/y), with the rebound driven primarily by core services returning toward their underlying trend and a pickup in core goods. Headline inflation should remain softer than core due to continued declines in energy prices-we forecast headline at 0.10%m/m (3.4%y/y, NSA index: 334.029). We think a core print rounding to 0.3% is more likely than one rounding to 0.1%," MS notes.

"The main upside risk is a larger rebound in non-housing core services than we anticipate, particularly in lodging away from home, medical services, and communication services. Downside risks appear more limited. On the goods side, apparel inflation could come in softer than expected, while a sharper-than-anticipated deceleration in household operations, a historically volatile category, could also bring down services ex-housing inflation relative to our numbers," MS adds," MS adds.