US index futures have turned sharply downward this morning dropping 0.8% to 1.2% in the minutes following a hotter than expected US consumer price inflation report. Headline CPI came right down the middle at 8.3%, which was higher than the 8.1% street estimate but lower than last month’s 8.5%. Core CPI (excluding food and energy) also came in higher than expected (6.3% vs street 6.1% and previous 5.9%). Investors appear to have taken this as keeping the pressure on the Fed to remain hawkish, particularly after several Fed speakers over the last few days had warned against reading too much into last month’s positive inflation report.
US treasury yields are climbing on the news. The 10-year yield has moved back above 3.40% and is approaching its June peak near 3.48%, while the 30-year yield trading is above 3.55% and has been approaching highs last seen in 2018. The US Dollar is also rallying, gaining 0.8% against Gold, 0.7% against the Euro and Pound, and 0.4% against the Canadian Dollar.
Overseas, UK wage inflation continued to increase (5.2% vs street 5.0% and previous 4.7%). US producer prices are due tomorrow with the street expecting declines in both the headline number (street 8.9% vs previous 9.8%) and core PPI (street 7.1% vs previous 7.6%). Commodity prices continue to rebound this morning with WTI crude oil up 1.3%, natural gas up 1.9%, gasoline up 2.3%, and copper up 1.0%. Grains have also been on the rebound lately with wheat climbing 1.4% and soybeans gaining 1.2% today. Rising commodity prices appear to be helping to cushion the blow for the Canadian Dollar today