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US dollar stretches the gains in the wake of sizzling CPI

US dollar climbs across the board

The US dollar is around 50 pips higher across the board, though a bit less against the yen on risk aversion.

I’m watching the bond market closely and so far it’s a bit of a stalemate. You’ll remember that last month, long end yields initially pushed higher and then were flushed much lower. So far US 10s are up to 1.38% from 1.355% before the report. In the past few minutes, it’s started to come down.

In FX, the euro has fallen below 1.18 but all eyes are on last week’s low of 1.1782.

It’s a tough one to think through. Obviously, there are some real skews in the data with used car prices and laundry machines skewing inflation higher but in the last couple months there has been a creep higher in rents and higher prices in apparel/travel could last for months. The base case is still that it’s transitory but you need to get the top right to make the trade.

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