The US CPI report hasn’t come yet but we are seeing markets start to turn around a fair bit on the session now.The dollar is falling further across the board with bond yields tracking lower while equities are gaining some solid ground on the day. 10-year Treasury yields are down 5.3 bps to 2.94% while S&P 500 futures are up 42 points or 1.1% to 4,038 currently.It’s a shake out of the recent market moves but it also fits with a couple of narratives perhaps, most notably that of ‘peak inflation’ and one that sees markets reverse course the April action. But some other potential narratives to consider are:Markets have fully priced in Fed hawkishness and is fearing today’s inflation report will justify that the move in the rates market has maxed out alreadyThe deleveraging pressure is cooling off, perhaps with a key data release in the offingThere’s no straightforward answer just yet but we’ll get a better sense once the US CPI report has been digested.For now, the dollar is coming under some modest pressure with USD/JPY falling back below 130.00, USD/CAD back below 1.3000, and AUD/USD inching slightly above 0.7000.
An early shift towards ‘peak inflation’ on the day?
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