Traders reasoned that the slightly above-expected CPI data of 3.7% was unlikely to push up interest rates.
Stock moves were mostly modest as markets shifted their focus to a European Central Bank meeting later in the session.
Overnight data showed higher fuel prices had lifted headline US consumer prices by the most in 14 months in August, for an annual rate of 3.7% which was a touch above expectations. Core inflation slowed to an annual 4.3%, as expected.Benchmark 10-year Treasury yields finished the New York session a bit more than a basis point lower and fell by a further basis point early in the Asia session to 4.24%. Two-year yields spiked above 5%, but were last at 4.97%.
Fed funds futures hardly budged on the inflation data, and imply nearly no chance of a rate hike next week, and about a 45% chance of another hike by year’s end. “Either the ECB surprises by not hiking, or they deliver a very dovish late cycle hike,” said Brent Donnelly at Spectra Markets. “Either way, it’s not bullish euro,” he said.
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