- USD/CHF bulls tally up fresh highs but market volatility shakes out the weak hands.
- Profit-taking has ensued following the US CPI print.
USD/CHF has rallied on the back of the hotter-than-expected US Consumer Price Index which has sent the US dollar, as per the DXY index, on a tear towards the 114.776 area and bull cycle. However, the markets are volatile and the greenback is falling back under pressure into the first 30 minutes of the cash open on Wall Street, potentially affected by some suspicious activity in USD/JPY.
Meanwhile, the US CPI data arrived as follows:
- US CPI (MoM) Sep: 0.4% (est 0.2%; prev 0.1%).
- US CPI (Y0Y) Sep: 8.2% (est 8.1%; prev 8.3%).
- US CPI Core (M0M) Sep: 0.6% (est 0.2%; prev 0.6%).
- US CPI Core (Y0Y) Sep: 6.6% (est 6.5%; prev 6.3%).
Sea of red after US CPI
The data is a blow to the Federal Reserve as their efforts to tame inflation have yet to show any significant signs that they are moving the needle. Hotter-than-expected US inflation numbers for both the core and headline measures have encouraged US short-term interest-rate traders to price in around one-in-ten chance of a 100-basis point fed rate hike in November, up from zero before the CPI report. Consequently, US benchmarks collapsed wth the Dow touching as low as 28,660 in a strong bearish opening gap from 28,983, around 1.8% lower. However, the Nasdaq Composite was the weakest major index, dropping by 3%, while the S&P 500 fell 2.6%.
No Fed pivot in sight
Forget about a Fed pivot with Fed funds futures now pricing in the odds of a 75 basis points move in December as well as November. ''Traders are now pricing in a rate hike of 64 basis points in December, up from 57 basis points before the data, which essentially implies a greater chance of a bigger hike. The possibility of a 100 basis points increase in November has also reared its head, though its currently seen as unlikely, with only a 9% probability,'' Reuters reported.
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