Markets:

  • USD leads, AUD lags on the day
  • European equities lower; S&P 500 futures down 0.12%
  • US 10-year yields up 3 bps to 4.363%
  • Gold down 0.53% to $2,605
  • WTI crude up 0.68% to $68.49
  • Bitcoin down 2.05% to $86,900

It’s been a rather slow session as the lack of key economic releases and limited news flow kept the price action pretty rangebound.The only notable release today was the UK labour market report which was mostly mixed although it leant more on the dovish side. Nevertheless, it doesn't change anything for the market or the BoE.

We are now approching the US CPI report due tomorrow and that's going to be an important event. At the latest Fed’s decision, Fed Chair Powell said that they expect bumps on inflation and that one or two bad data months on inflation won’t change the process. This keeps the 25 bps cut in December in place even if we get higher inflation readings.

The market though is forward-looking, and the rise in Treasury yields showed that the market sees risks to the inflation outlook. Moreover, the red sweep could increase those fears if the progress on inflation stalls, or worse, reverses.

The US Dollar might benefit from a hot CPI, while bonds and gold could see some more weakness. Risk assets like stocks and bitcoin though might shrug off a higher than expected reading as long as the Fed doesn't change its reaction function.