Markets: Gold up $13 to $1966 US 10-year yields down 6 bps to 2.72% US 2-year yields down 13 bps to 2.38% WTI crude oil up $6.23 to $1
Markets:
- Gold up $13 to $1966
- US 10-year yields down 6 bps to 2.72%
- US 2-year yields down 13 bps to 2.38%
- WTI crude oil up $6.23 to $100.53
- S&P 500 down 15 points to 4397
- AUD leads, EUR lags
We got a taste of the ‘peak inflation’ trade after Tuesday’s CPI report. The market was likely braced for an upside surprise but the headline was only a hair higher and the core numbers were lower than expected. That led to a quick and substantial drop in the US dollar. It was coupled with falling yields (particularly at the front end) and a jump in stocks.
Aside from yields, nearly the entire move later retraced.
I think some of that has to do with worries around earnings season, which starts tomorrow. Companies are likely to deliver non-stop complaints about inflation for the next six weeks and that will be a drag on margins.
The commodity currencies were taken for a ride on the dollar move. USD/CAD dropped to 1.2582 from 1.2643 with help of strong oil prices but the drop didn’t last and after hours of consolidating around 1.2600 it rose back to 1.2640 late.
AUD/USD managed to close out the day holding some of the post-CPI gains but only about 15 pips as risk sentiment dissipated. It was similar for NZD.
Cable followed the script as it jumped to 1.3050 from 1.3010 on the CPI print but was later sucked right back. It’s been a difficult time getting off of 1.3000 for the bulls and that’s not a great sign for the pound.
The ugliest price action on the day was in the euro as it’s poised to close at the lowest closing level since May 2020 and narrowly above the March intraday high. The pop yesterday on higher German yields disappeared as the market continues to focus on the worsening growth picture. Putin didn’t help with his comment that talks are at a ‘dead end’.
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