US dollar turns back higher in choppy trade after the CPI report

The market is having a tough time digesting the January CPI report as the dollar has swung back and forth.

It comes back to the question: Will the Fed have to hike rates further? Headline inflation was a tad hot but core inflation was inline; there remain reasons to expect continued cooling for the remainder of the year but will it be enough? Or will the seeming re-acceleration in the economy spark another round of price increases?

I don't think any detail of the CPI report offers a convincing clue but the bond market is showing some unease about how high the Fed will hike and how long rates will stay there. That's most-visible in Fed fund futures where the July top is now at 5.23% from 5.19% before the data. The US 2-year note yield is also up 4 bps to 4.58%.

The FX market is now falling into line with that thinking as the US dollar recoups some of the losses from yesterday.

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In a few minutes, we will get comments from the Fed's Barkin on Bloomberg TV and later we'll hear from Logan, Harker and Williams so we'll get a better idea of whether this has changed their thinking.