EUR/USD, USD/CHF, USD/JPY flows - provocative core upside
Upside on core jolts Oct vs Dec pricing, with a testing decision now for the Fed
Dollar renews bid - if reaction does stick today rather than get faded, could see a run on to next big level references
As suggested was the risk, upside surprise on the core rate has materialised, coming in at 0.3% (mkt 0.2%) and 2.5% from 2.3% (mkt 2.4%). Unrounded also comes in high side at 0.33%.
Data is quite ‘provocative’, you could say, for a Fed that had really wanted to bide its time on the next move. Hike probabilities for next month kneejerk back to more balanced from just 20% prior. It will be interesting to hear what the next round of Fed speakers have to say about it.
Dollar responds accordingly, and does see a decent reaction, with EUR/USD renewing its bigger push for the 1.10 level and other ‘low yielders’ also squeezed vs the dollar with the yield bounce. Stickability is now key – if the reaction is not reversed quickly then a next extension leg could run quite quickly.