Forex today: dollar bid on CPI and Fed hike expectations

Forex today saw the dollar rally and US yields higher on US CPI beating expectations that lifted the expectation of a Fed December hike to around 50% which is significantly higher than last week's consensus.

The recent resurgence in the greenback also comes amid renewed optimism from investors in respect to a sense of urgency coming from the Trump administration of tax reform. The combination of the 'less damage outlook' from the recent weather storms and today's CPI, such bullish sentiment enabled the DXY to break back on the 92 handle and stay there, so far, this week.  However, the dollar wasn't performing quite as well today and the initial knee jerk spike post CPI was met with supply and a mixed bag of bids and offers for the majority of the session, with various headlines about N Korea missile preparations late int he session. 

DXY finished the day -0.51%. US 10yr yields initially rose from 2.19% to 2.22% following the US CPI data, but then fluctuated as low as 2.18%. The Fed fund futures yields firmed, pricing the chance of a December rate hike at 51% (46% previously). 

The main mover was GBP on the back of BoE's Carney setting the stage for a rate hike, running up from 1.3149 to the 1.34 handle. EUR  went from 1.1880 to 1.1920, via some noise around the US data/Korea. USD/JPY was choppy with a light bid between 110.40 to 110.60. As for the Antipodeans, AUD dropped back from overnight jobs gains fuelled rally and scored a low of 0.7956 from the 0.80 handle while the Kiwi was pressured due to the election polls showing that Labour was taking the lead. Kiwi dropped the 0.72 handle losing 70 pips down to 0.7184 low before a chop back to 0.7210, 30 pips shy of its opening price. 

Key notes for the US session 

US CPI rises and reviewed - Nomura

US Treasury Sec Mnuchin: Tax cuts can be paid for through economic growth

Wall Street closes mixed with Dow at record high and S&P & Nasdaq lower

US Sec of State Tillerson: Going to be very difficult to secure oil embargo on N. Korea

Key events ahead for Asia

No events in Asia today