Dollar keeps steady after recovering from the US CPI report yesterday
US consumer inflation was not as hot as estimated in August and that saw the dollar retreat initially with stocks rising but most of that reversed before the end of the day as the market has second thoughts in running with the 'transitory' narrative.
I mean even at +5.3% y/y, consumer inflation is still well above the +2.0% y/y target laid out by Fed policymakers so there's that to consider (although one can argue that the details making up the report are still rather murky and distorting the final figure).
Treasury yields are still keeping lower though, with 10-year yields dropping back under 1.30% and meandering around 1.28% to 1.29% as we get things going today.
The bond market is still not giving much clues since the start of the month and that is allowing for more of a push and pull, with perhaps only the FOMC meeting next week able to provide a strong enough catalyst for a meaningful directional push.
Looking past all of this, there are worries for risk trades in general and that may be somewhat helping with flows for the dollar as of late.
The growing number of calls for a correction in equities amid frothy levels adding to mounting worries in China particularly creates a major headwind that the market may not quite be all too prepared for, especially if the Chinese economy faces a hard landing.
