Yields and the USDIndex popped higher after the hotter than projected 0.4% rise in headline CPI. Still low initial jobless claims added to the moves. The front end of the Treasury curve is underperforming on the more hawkish implications for the FOMC. The report has fostered some profit taking on the recent Treasury rally. The USDIndex firmed to retest 106.099, but has slipped back to 105.930. Wall Street futures pared earlier gains though the major indexes are still fractionally in the green.
In spite of the hotter headline CPI, we don’t believe the composition of the report will alter the Fed’s policy stance significantly, with most officials looking to “proceed carefully,” as noted in the FOMC minutes, taking a more cautious, tempered approach for now. That underpins our outlook, and the markets’, for no change on November 1 amid a higher for longer strategy.
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Andria Pichidi
Market Analyst
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