One could argue that after yesterday’s PPI print would indicate a higher-than-expected CPI figure for today, and it was precisely what happened. The market’s expectation was exceeded and the 8.2% YoY figure led to the market now fully pricing in a 75bps hike from the Fed in November, with a 50% chance for another 50bps hike in December. Volatility after the print was exceptional, with the rand losing nearly 27 cents immediately after the release before settling back towards the R18.30’s where we are trading now. The euro and pound both lost ground after the release, but the latter is still trading stronger for the day.
The pound gained during the morning after reports that the British government is in talks to scrap parts of the unfunded tax cuts plan. The pound gained 1.5% from its opening level this morning before robust inflation figures from the US muted a portion of those gains. Cable has also since recovered and is currently up 1.1% for the day.
US stock markets ran into a massive brick wall after September inflation numbers exceeded expectations. The Nasdaq, which is down 36% for the year, opened up 1.5% weaker, while the S&P 500 and Dow Jones also opened in the red. Gold lost 1.5% for the day, and the yellow metal is nearly $35 off its high for the day. US Treasury yields rose shortly after the CPI print, and the 10yr yield touched the 4% mark.
