USD Flows: CPI miss takes heat off, but too early to call more than respite

Rather a large downside miss on the CPI data with core coming in flat vs mkt 0.3% and yr/yr down to 2.6% (mkt 2.8%). Clearly offers the Fed some breathing room especially in light of Wallers’s comments, even if current re-escalation and renewed rise in energy prices keeps things live and suggests not taking too much comfort in one print.

Kneejerk makes the adjustment within current recent confines i.e. EUR/USD back towards 1.1450 side of band rather than 1.1350 side. It's too early for the market to be committing to a renewed ECB-Fed divergence mindset yet based off one figure during the energy price breather

Meanwhile, first skim of the Warsh prepared remarks seems to broadly echo most of his comments at the first presser regarding the nature of the current macro situation and the AI dual inputs. He again tends to frame current inflation overshoot as effectively past monetary policy error and something for the taskforces to look into on changing ideas and approaches going forward.

Maybe the one notable comment is that the task force will examine the advantages and disadvantages of the ample reserve regime and explore alternatives. That again highlights that this will be be one to watch for the wider market and monetary setting, if more medium-term.