- US November core CPI 4.0% y/y versus 4.0% y/y expected
- REINZ New Zealand median home sale prices -2.0% y/y
- US November Federal budget deficit $314 billion vs $301 billion expected
- ECB's Villeroy: Inflation path to 2.4% from 10.6% is impressive
- US Treasury auctioned off $21 billion of 30 year bonds at a high yield of 4.344%
- US hits Russia with another round of sanctions but eyes on Zelensky in Washington
- A hint on 'the last mile' from Janet Yellen could be an important one
Markets:
- Gold down $2 to $1978
- US 10-year yields down 3 bps to 4.21%
- WTI crude oil down $2.64 to $68.67
- S&P 500 up 21 points, or 0.4%, to 4667
- JPY leads, AUD lags
All eyes were on the CPI report on Tuesday but -- like non-farm payrolls on Friday -- the price action was choppy and indecisive. The data was generally in-line with estimates and the first reaction was to sell the US dollar. That quickly reversed on some hotter details, including supercore at +0.44% m/m. That sent the US dollar to the best levels of the day but as time went on, analyst began to poke holes in that pointing out the outside impact of autos and auto insurance rates on the report. That led to some USD selling that ultimately left a mixed bag on the day.
The bond auction was the other main event and all the talk was about another tail following the 5.1 bps miss last month. But there was a 1.3 bps stop through and a sign of relief that led to some bond buying and USD selling.
Stocks also remained buoyant with some long-term highs on some US indexes. That lent a bit of support to risk trades, weighing on the US dollar but perhaps not as much as you would expect.
Oil cratered once again and natural gas fell further. That added to the sense that inflation will be back to target in short order. That's something the Fed could push back against at tomorrow's FOMC meeting but the market doesn't seem overly concerned. After all, if headline inflation falls to 2%, is the Fed really going to keep rates high?
