Rising dollar and rising yields
The surprise in the September CPI report was in wages, which rose 0.8% in the month in a sharp acceleration from the 0.3% climb a month earlier.
The gain today tracks to a +10% annualized rate and would be a key ingredient in a potential wage-price spiral. The caveat is that low-wage job declines in the latest wave of the pandemic may have skewed the data.
Whatever the reason, the market is clearly concerned about it as 10-year Treasury yields have risen to 1.595% from 1.570% before the data. That's spread to FX where the dollar is higher on the prospect of sooner rate hikes. It's a fairly uniform 15-25 pip move with USD/JPY rising even so slightly above yesterday's high but not yet ready to break out.
What may keep the bond market and dollar in check for the next few hours is a 30-year bond sale at 1 pm ET. That will go a long ways towards setting the tone and highlighting underlying demand for duration.