Asia wrap: No Silver lining

Stephen Innes SPI Asset Management

Wednesday's inflation report dealt a significant blow to the Federal Reserve's aspirations for a soft landing as, once again, inflation outpaced expectations.

Hotter-than-expected prices force Fed officials back into a cautious stance, where they must await further clarity on inflation dynamics and tangible signs of economic deceleration before even entertaining a rate cut before Q4.

This uncertain policy period will negatively affect risk sentiment in the short term. It highlights the challenge policymakers face as they navigate the complexities of monetary policy in a constantly changing reflationary environment.

Few read the room wrong; after the CPI print the 10-year UST auction tanked as traders abandoned their earlier projections of a rate cut by June and the possibility of three cuts throughout the year.

Consumer Price Index (CPI) readings have once again thrown a wrench in the Federal Reserve's plans. These figures paint a picture that diverges from the year-on-year (YoY) prints returning to the Fed's target. The annual pace remained 3.8% for March, unchanged from the previous month's rate. Interestingly, on an unrounded basis, the YoY reading edged higher.

You will likely come up empty-handed if you're searching for a silver lining in this data.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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