BUZZ-COMMENT-US recap: EUR/USD rises as post-CPI dollar surge falters
October 13 (Reuters) – The dollar index tumbled on Thursday after a strong rally in the better-than-expected U.S. CPI gave way to a stunning reversal on the back of a strong rebound in equities.
Leading the charge against the dollar, the pound jumped more than 2% on reports that the UK government was considering altering fiscal plans that catalyzed the pound’s fall in September.
Falling gilt yields outweighed the Fed’s rate hike and pared the roughly 30 basis point CPI-induced rise in 2-year Treasury yields by about a third, while the dramatic reversal of initial stock market losses into significant gains further weakened the dollar. look of refuge.
EUR/USD traded in a range of 0.9632-0.9806 on EBS and was up 1% after hitting its lowest since September 29 and its highest since last Friday.
Yields on Wednesday’s gilts dipped on much stronger use of the BoE’s emergency bond purchase facility – which is due to end on Friday – the pound was supported as it approached the session.
Yields on 2- and 10-year gilts fell nearly 30 basis points on Thursday on hopes that fiscal stimulus won’t undermine the BoE’s ability to fight inflation, which is currently forecasting rate hikes of 200 basis points before the end of the year.
USD/JPY hit a fresh 32-year high at 147.665 on the EBS, but this was seen as a failed break above the 1998 peak of 147.64 and just cause for long buybacks generate profits.
The focus now shifts to Friday’s US retail sales, which the higher-than-expected CPI should theoretically support. The November 1-2 Fed meeting is expected to produce a fourth consecutive 75 basis point hike.
Yields on two-year and 10-year Treasury bills rose 12.4 basis points respectively and remained stable after breaking above post-CPI extremes, further inverting the 2-10-year yield curve at -50 points. basic.
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(Editing by Burton Frierson Randolph Donney is a Reuters market analyst. Opinions expressed are his own.)
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