Markets flipped overnight on the hot US CPI report with DXY taking support at the 105.50 level. I mentioned about the risk reward in favor of USD longs in yesterday's post ahead of the DXY support and to play the divergence between the Fed's guided path and market pricing.
US CPI for the month of Sep rose 0.40% mom and 3.70% yoy. The largest contributor to the monthly increase was the shelter index. Another major component was the gasoline index. Core CPI rose 0.30% mom and 4.10% yoy. Core services excluding rent rose 0.60% mom.
The Initial jobless claims came in at 209K and continuing jobless claims rose 30K to 1702K , highest in 6 weeks.
Fed Fund Futures implied market pricing for Dec 24 shifted higher to 4.70% from 4.54% we saw yesterday. Yields on USTs rose sharply higher with US2s marking a high of 5.09% and US10s marking a high of 4.73%. The move in US yields was also driven by a poor $ 20 bn 30Y auction
This morning China CPI came in at 0.20% mom below consensus reading of 0.30% mom and PBoC continued the trend of USDCNY fix lower yet again today with fix coming at 7.1775 below market expectations of 7.3179. Yesterday, news of China’s US$1.35 trillion sovereign wealth fund boosting its equity stake in nations 4 biggest banks supported the market sentiment in the equities market.
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