Markets:
- Gold down $27 to $1992
- WTI crude up 86-cents to $77.78
- US 10-year yields up 15 bps to 4.32%
- S&P 500 down 1.4%, Nasdaq -1.8%
- USD leads, AUD lags
The US greenback rose sharply within the wake of the higher-than-expected inflation knowledge in a transfer that was disproportionately sturdy response to what was +0.1 pp shock in month-over-month core and headline CPI. There were signs of a excessive studying however even with that, the greenback rocketed greater with USD/JPY initially up 100 pips and later including about 50 extra to hit a three-month excessive of 150.80.
The euro dropped to 1.0700 from 1.0795 however could not get by means of the determine. Within the hours main as much as the report, the greenback was softer in an indication of an underlying bias available in the market. Nonetheless that bias was lifeless flawed because the numbers got here in sizzling; with that shift maybe added gasoline to the greenback fireplace.
Fed pricing now pegs simply 86 bps in cuts this 12 months, down from 111 in the beginning of the day. We look forward to a heavy dose of Fed speak within the the rest of the week to assist interpret it.
One of many causes that pullbacks have been so small within the greenback was that a number of the particulars within the report have been sizzling. Providers much less hire rose 0.6% and the core studying was greater than any non-pandemic studying in a decade. There have been many who pointed to January quirks however the broad considering is that the Fed must keep greater for longer.
Treasury yields broke out of the current vary with US 10s as much as 4.33%. The 50% retracement of the Oct-Dec drop is at 4.40%. Eyes can be on a trio of Fed audio system tomorrow, together with the dove Goolsbee who’s going to have a tough time discovering causes to maintain speaking about price cuts.
Apart from CPI, it was a lighter information day however the inflation report definitely gave the market loads to consider.
