The US dollar fell further after the reopening of 30-year bonds
I think the Bank of Japan is a much more important factor in today’s trading than the CPI.
Overnight, fresh hints that the BOJ is preparing to relinquish control over the yield curve after next week’s meeting sent the yen higher. I strongly suspect that Japanese bonds are undervalued in favor of Treasuries whenever possible.
That made a big bid for U.S. fixed income, where yields fell 8 to 13 basis points across the curve today.
The likelihood of a CPI and 50bps hike on February 1st is clear, but there is a feedback loop created by bond buying. This meant US dollar sales and stock offers.
In addition, the headwinds in Europe have weakened due to lower TTF prices (although they are 2 times higher than two years ago) and resistance from European consumers. Valuation trading is also brisk, with money moving from the US dollar to Europe, China and emerging markets.
Either way, these are the types of intraday moves that send FX traders to their first grave.
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