AUD hard work undone by hot US inflation report

Key Movers

The USD and USD DXY index shot upward through trade on Thursday, reversing losses suffered through the last five days following a much hotter than expected September inflation report. Much of the work done to flatten US yields curves through the last week was undone overnight after headline CPI pressures came in above expectations, while the year-on-year rate of inflation failed to track lower. Leading indicators had suggested a softening in price pressure and continued to trend back toward the Federal Reserves inflation targets. Instead price pressures proved sticky with core services inflation countering a better than expected downturn in core good prices. With Fed officials talking to the natural tightening of financial conditions, markets had hoped a continued correction in price pressures would allow the Fed to end its tightening cycle, opening the door for other major currencies to find some momentum and range to recoup September losses. Alas it was not to be and the USD has all but pared the weeks early downturn as investors work quickly to drive US yields higher again. The Great British pound gave up 1%, tumbling back below 1.22, while the euro slid below 1.06 and 1.0550, and the yen proved somewhat resilient as the USD rebound paused just short of 150. Markets are still wary of extending beyond this level after the last foray was countered with a swift and aggressive reversal amid speculation of BoJ intervention. As a result the yen has been among the best performers through the last 24 hours, as our attentions turn to China trade and inflation data, and US consumer sentiment numbers for direction into the weekly close.