• Gold down $21 to $1702
  • US 10-year yields up 6 bps to 3.42%
  • WTI crude oil down 33 cents to $87.45
  • S&P 500 down 181 points, or 4.4%, to 3928 - worst day since June 2020
  • Nasdaq down 5.6%
  • USD leads, NZD lags

All the talk for the past week was about today's US CPI report and the hype certainly delivered. It was a one-way report will all the core and headline metrics beating expectations handily. The initial reaction was to buy the US dollar, the secondary reaction was to buy the US dollar and the late-day reaction was to buy even more dollars.

The thrust of the move was improved by an utter rout in US equities and the front end of the curve.

Fed fun futures put 100 bps in play at next week's meeting with the implied odds at 35% now. US 2s hit a cycle high at 3.75% with the implied path of Fed funds hitting 4.33% at the peak.

In general, it would be safe to say that today's report added 25 bps to the Fed path and has shaken the market out of the idea of a 4.00% terminal top. Or as I said here:

"Over the summer, the market grow comfortable with 4% terminal rates in North America, but the latest round of inflation data hints that might not be enough," said Adam Button, chief currency analystat ForexLive.

There was much of a shape to the USD move as it was fairly uniform across the board, though particularly strong against AUD and NZD. The loonie held in a bit better as oil prices traded nearly flat after a report about the US buying SPR oil at $80. In terms of levels, NZDUSD broke the Sept low to a new cycle low since the early days of the pandemic.

The euro paused briefly at parity before sinking further to 0.9975. It had been at 1.0187 shortly before the CPI and most currencies were hitting new highs just before the data. That highlights that traders were leaning towards a soft report but it was just the opposite.

Cable is flirting with 1.1500 at the moment and that doesn't leave much room above the 1.1405 cycle low set last week.

The big one might be USD/JPY as it jumped to 144.52 from 141.85. Last week's high was 144.99 and a new break of that will spark some more jawboning from the BOJ. More importantly, signs of higher global inflation could cause the BOJ to shift its stance.

Note how nearly everything is finishing the day at an extreme:

FX news wrap Sept 13