US index futures have exploded to the upside this morning in the minutes following the release of a better than expected US inflation numbers for both the Consumer Price Index (7.1% vs street 7.3% and previous 7.7%), and Core CPI excluding food and energy (6.0% vs street 6.1% and previous 6.3%). On this news, US index futures have gone from being up 0.6%-0.7% to being up 2.3% to 4.4% with NASDAQ futures leading the charge.
Action in index futures suggest that investors may be thinking that the Fed may be able to deliver on recent hints and slow the pace of interest rate increases tomorrow afternoon. It also may be influencing expectations for the peak/terminal rate, and how soon rates may be able to start coming back down, which may be hinted at in tomorrow’s Fed Funds forecasts (aka the Dot Plot).
The US 10-year treasury note yield has dropped from near 3.6% toward 3.5% on the news, and the US Dollar has turned sharply downward, igniting rallies on other currencies and commodities. WTI crude oil is up 1.7%, Natural gas is up 5.3% Silver is up 2.5%, and Copper is up 2.0%. In currency action Gold is up 1.5%, the Canadian Dollar is up 0.7%, while the Euro is up 1.0% and the Pound is up 1.2% ahead of tomorrow’s ECB and BOE meetings. Cryptocurrencies had already been climbing overnight on the news that Sam Bankman-Fried, former CEO of the bankrupt FTX crypto exchange, has been arrested in the Bahamas and facing extradition to the US, have soared on the inflation news with Bitcoin climbing 4.8% and Ethereum gaining 6.5%.
