March CPI data was reported above expectations in all categories.
- CPI M/M: +0.4% (+0.3% est. ; +0.4% prior month)
- CPI Ex Food and Energy: +0.4% (+0.3% est.; +0.4% prior)
- CPI Y/Y: +3.5% (+3.4% est.; +3.2% prior and the highest reading since last September)
- CPI Ex Food and Energy: +3.8% (+3.7% est.; +3.8% prior)
More evidence of resurgent inflation will likely keep the Fed on hold and traders responded by pricing out the likelihood of a cut at the FOMC’s June 12th meeting. U.S. Treasury yields are sharply higher in all tenors with the 3yr leading +0.223%. The 10yr yield is +0.141% at 4.505%, highest since November’s 4.5323%. Fed Funds Futures now imply only two 25bps cuts this year after pricing in seven 25bps cuts as recently as January.
Higher yields have lifted the dollar, leading to a 0.83% gain in the U.S. Dollar Index to 105.107, its best result since November. The USD is higher vs. all G10/major currencies: +1.42% vs. AUD, +1.16% vs. SEK, +0.98% vs. NOK, +0.97% vs. NZD, +0.85% vs. CHF, +0.83% vs. EUR, +0.77% vs. GBP and +0.57% vs. JPY and CAD.
The dollar’s gain vs. the JPY lifted USD/JPY above 152.00 to reach an intraday high of 152.73 with traders on high alert for potential BoJ intervention.
The Bank of Canada left its overnight target rate unchanged at 5.0% in today’s policy decision.
Attention now turns to tomorrow’s PPI data release with core Y/Y PPI forecast 2.3%, up from the previous 2.0%.
The major U.S. equity indexes are lower, the S&P500 leading losses -0.98%.
