The much hotter-than-expected CPI does not offer much in the way of pleasant news for equity markets, with 10-year Treasury yields topping 4 %

The second-round effects of inflation are clearly being felt across the economy.

While the Fed remains on autopilot for a 75bp hike in November, investors will need to think more seriously about 75bp in December.

If The FOMC minutes indicated a data-dependent Fed that requires a high hurdle to pause its rate-hiking cycle, that hurdle got immeasurably higher.

The strong CPI only reinforces the view that there is no way the Federal Reserve can contemplate a ‘pivot’ this year. For the dollar, USD long fatigue was starting to emerge, but the USD higher is still the path of least resistance.


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Synchronized global growth is the best USD-lower environment, but that is nowhere to be seen. Other catalysts, such as China ending zero-covid or easing European energy fears, also look well beyond the horizon, as is the Fed. pivot

The topside CPI beat adds further persuasion to short the Yen. How quickly USDJPY can get to the Y150 will be partly determined by a materializing bond market engagement to see if the US 10y yield can finally settle above 4%.

Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT