Soft US CPI crushes yields and pushes US dollar to a six-month low

After being in hibernation since the US November payrolls and services ISM reports, the peak inflation narrative got another lift this afternoon when US CPI rose by its lowest annual number this year, sending European markets sharply higher, and the Stoxx 600 and DAX to their highest levels in 6 months, although we are pulling off those peaks heading into the close.  

Europe

A number of 7.1% was below expectations of 7.3% and offered a boost to those who think that the Federal Reserve may not have to go as hard, or as far on rate hikes as we head into 2023.

Whether or not that particular narrative survives first contact with Fed chair Jay Powell tomorrow, and the post meeting press conference remains to be seen, but it’s now getting to the point that Fed officials can no longer dismiss the direction of travel for headline CPI as one particular data point. A trend appears to be forming as far…

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