• US 10-year yields up 18 bps to 4.54%
  • WTI crude oil up $1.05 to $86.28
  • Gold down $20 to $2332
  • S&P 500 down 49 points, or 0.9%, to 5160
  • USD leads, AUD lags

The inflation doves were clinging to ever-declining shreds of evidence about falling inflation ahead of the CPI report and the hot numbers dashed their hopes. The odds of a June cut fell to 20% from 55% and July is now 50/50. The bond market recoiled and that was further emphasized by a poor 10-year Treasury sale.

In FX, the dollar soared on higher rates and soared even further on risk aversion with AUD/USD down nearly 2%. It was a fast move on the headlines and then a grinding one afterwards with nearly no pullbacks or dips. EUR/USD sank 60 pips to 1.0790 initially then slowly sagged to 1.0740. Cable finishes the day 160 pips below its pre-CPI levels.

The Bank of Canada decision was the other main event of the day and the market was pricing in a 20% chance of a cut. Even though the BOC didn't deliver, there were enough hints of a June cut to keep the doves happy. After the decision, USD/CAD continued higher, though the damage to the loonie was about half of that to the Aussie and kiwi.

In Japan, USD/JPY rose to a 34-year high, breaking the 152.00 barrier. A quick move up to 152.50 on the data then back to 152.00 was a sign of intervention as was the lid at 153.00 for most of the day. However just in the past few minutes, 153.00 has broken and ran some stops. The MOF is in a difficult position as the best they can do now is soften the yen's decline.

Geopolitics also invaded the trading day on increasing reports than Iran or its proxies are preparing to attack Israel. Oil had been as low as $84.55 but jumped late to finish at $86.16.

It will take some time to sort through CPI but there isn't much on the calendar to change the market's mood. We will be watching out for Fedspeak starting early in tomorrow's US session with Williams.

FX news wrap April 10