The market is having a tough time digesting the January CPI report as the dollar has swung back and forth.
It comes back to the question: Will the Fed have to hike rates further? Headline inflation was a tad hot but core inflation was inline; there remain reasons to expect continued cooling for the remainder of the year but will it be enough? Or will the seeming re-acceleration in the economy spark another round of price increases?
I don't think any detail of the CPI report offers a convincing clue but the bond market is showing some unease about how high the Fed will hike and how long rates will stay there. That's most-visible in Fed fund futures where the July top is now at 5.23% from 5.19% before the data. The US 2-year note yield is also up 4 bps to 4.58%.
The FX market is now falling into line with that thinking as the US dollar recoups some of the losses from yesterday.
US equity futures also bounced around but spoos are now down 0.3%.
In a few minutes, we will get comments from the Fed's Barkin on Bloomberg TV and later we'll hear from Logan, Harker and Williams so we'll get a better idea of whether this has changed their thinking.