The consumer price index increased 0.6% from December, the Labor Department stated. In the 12 months through January, CPI bounced 7.5%, the biggest year-on-year gain after February 1982.
The data scored the fourth straight month of yearly gains over 6%; this made St Louis Federal Reserve Bank President James Bullard, a voting member of the Fed’s policy-setting committee, “dramatically” more hawkish, he stated.
The dollar index, a meter of the dollar’s value versus six major currencies, initially increased nearly 0.5%. It then declined 0.4% and ended virtually flat. It was last higher 0.08%.
Higher interest rates generally would lift the dollar. However, the market is already adequately long dollars, said Bipan Rai, head of FX strategy at CIBC Capital Markets.
Options of a 50 basis point interest-rate hike increased to more than the possibility of a 25 basis point increase as was envisioned before.
The market also thought about how other central banks would fight inflation that’s on the rise globally, driven primarily by rising commodity prices.
Rates skyrocketed after the CPI data was released, particularly at the short end. The two-year U.S. Treasury yield, which typically proceeds in step with rate expectations, rose 26.1 basis points to 1.609%. The yield on 10-year Treasury notes ended 2% for the first time in 2-1/2 years.
The rates market challenged the extent of inflation, expressed Nancy Davis, managing partner, and chief investment officer at Quadratic Capital Management LLC.
Europe Central Bank Policies
Earlier in Europe, the Swedish central bank maintained its monetary policy plans broadly intact and stressed that swelling inflation is temporary.
The dovish stance by the Riksbank directed the dollar to post its biggest gain among major currencies; hence, the Swedish crown dropped 2.01% versus the dollar at 9.31 per dollar.
The euro increased 0.11% to $1.1434.
The Japanese yen cut 0.43% at 115.99 per dollar to hit a five-week low. The Bank of Japan stated it would interfere in markets by offering to buy an unlimited amount of 10-year Japanese government bonds at 0.25%.
In cryptocurrencies, Bitcoin last dropped 1.11% to $43,985.20.
