US dollar under pressure
The dollar is slumping hard today with US 10-year yields now down 1.2 bps to 1.65% from a high of 1.70%.
However the dollar move has far-exceeded the move in yields. EUR/USD is now up to 1.1940 from 1.1890 just before the CPI report. The commodity currencies are also taking advantage of the dollar move.
The big news today is the pause in the J&J vaccine but the equity market is taking it in stride. Given that it’s a bigger problem for Europe than the US (which has ample Pfizer and Moderna vaccines) then that can’t be the trigger.
It’s clear that this is about CPI with some flows mixed in but that is a surprisingly large reaction to inflation that’s a touch higher than expected but not as high as feared following last week’s PPI jump.